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Malaysia held talks on SoftBank's $100bn Vision Fund

Sovereign fund and tech investor met in April

Masayoshi Son speaks during an earnings conference in Tokyo on May 9. (Photo by Yoichi Iwata)

TOKYO -- Malaysia's sovereign wealth fund Khazanah Nasional Berhad has held preliminary talks with SoftBank Group about a possible investment in the Japanese conglomerate's $100 billion Vision Fund, two senior sources familiar with the discussions have told Nikkei Asian Review.

Discussions were held in April, five months after Malaysian Prime Minister Mahathir Mohamad formally invited SoftBank Chairman Masayoshi Son to join Khazanah as a director and adviser.

Son, who earlier this month announced plans for a second fund on a par with Vision Fund, politely turned down the invitation, saying he wanted to focus his undivided attention on SoftBank.

"The talks are only preliminary,'' said one person familiar with the discussions, who cannot be named because he was not authorized to speak on behalf of Khazanah. "No final decisions have been taken."

A second source, who was also not authorized to speak on behalf of Khazanah, told Nikkei that the "discussions might take more time as Khazanah is very cautious in investing in foreign funds, especially under the new management."

A spokesperson for Khazanah declined to comment on the possible SoftBank investment. SoftBank declined to comment. A spokesman for the Malaysian government had not responded to requests for comment at the time of publication.

Son, who reportedly still wants to raise an extra $15 billion to pump into the existing Vision Fund, has built a global profile as an investor thanks to his knack for finding companies like Chinese e-commerce giant Alibaba Group Holding, on which SoftBank has substantial unrealized gains. 

The $100 billion Vision Fund, SoftBank's flagship investment vehicle, was unveiled in 2016 to take stakes in leading technology companies using artificial intelligence to disrupt traditional industries. So far, the only sovereign wealth funds known to have invested in the Vision Fund are from Saudi Arabia and Abu Dhabi.

Khazanah's appetite for tech-related assets has been on the rise since it paid $400 million for a 0.6% stake in Alibaba before its 2014 listing on the New York Stock Exchange. 

The sovereign wealth fund made a profit of more than $1 billion after selling down a portion of its Alibaba stake, and it remains one of Khazanah's most profitable investments. However, it has not to date invested in Son's Vision Fund. 

After Mahathir revealed last November that Son had declined his invitation to the board of Khazanah, the prime minister said he hoped to collaborate with the SoftBank chief to help spur tech investment in Malaysia. 

In 2016, then-Prime Minister Najib Razak appointed Alibaba founder Jack Ma as a digital economy adviser to the Malaysian government.

Mahathir has since retained Ma as an adviser, openly expressing his desire for deeper cooperation with Alibaba during a visit to the company's Hangzhou headquarters last August.

Khazanah, which reported a portfolio of assets worth $32.5 billion at the end of 2018, is currently headed by former pension fund executive Shahril Ridza Ridzuan. Mahathir Mohamad serves as chairman.

Since being appointed Khazanah managing director last year with a fresh mandate to grow Malaysia's long-term wealth, Shahril has conducted a thorough review of Khazanah's current holdings and investment strategies.

Khazanah pared stakes worth $906.4 million in several listed Malaysian companies last year, including IHH Healthcare Bhd, and Philippines-listed 8990 Holdings Inc.

Khazanah also decided to revamp its investment playbook by classifying its portfolios into separate commercial and strategic funds, after it posted a first-ever loss before tax of $1.5 billion in 2018, including an impairment of $1.74 billion -- half of which was attributed to national carrier Malaysia Airlines Bhd.

Mahathir is expected to arrive in Tokyo on Wednesday, where he is scheduled to address Nikkei's Future of Asia Conference.

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