It's rare for private equity firms to criticize their peers.
But as SoftBank — the Japanese conglomerate known for its acquisitions of technology, media and telecommunications companies — raises an almost $100 billion fund for technology investments, it has elicited skepticism from at least one prominent investor.
Oaktree Capital's Howard Marks took to criticizing SoftBank's Vision Fund in a new memo published on the firm's website Wednesday, saying that the contours are emblematic of an overheated market.
Marks, the co-founder of Oaktree, a two-decade-old alternative investing shop, questioned SoftBank's capacity to invest $100 billion and generate decent performance.
Marks said SoftBank's historic, 18-year track record has produced annual returns of 44 percent. But was that "skill or luck?" he asked.
SoftBank's "record of investment success has relied heavily on one investment," Marks said. He's talking about Alibaba, the Chinese e-commerce giant that SoftBank invested $20 million in in 2000, a stake that has grown to be about $50 billion today.
Is that kind of success "extrapolatable?" Marks asked in the memo.
He also asked whether there are enough viable opportunities to deploy $100 billion into tech companies, citing the abundance of capital that led to trouble in the venture capital industry during the dot-com euphoria of 1999 and 2000.
Marks pointed to what he said is a lack of experience managing outside capital.
"Here's an organization that has never managed money for third parties, starting the biggest fund in history to do just that," he wrote. "Is their experience transferrable? In all these regards I think the fund indicates a high level of enthusiasm and low level of skepticism."
He also challenged the structure of the fund, saying that once it reaches $100 billion in assets, SoftBank will have put up only 28 percent of the capital but will own half of the equity. He said the private-equity industry has historically shied away from levering up technology industries, although he admitted it has become more common recently. SoftBank doesn't hesitate to do that, he said.
What's more, Marks said the fund's limited partners will get paid a "modest" 7 percent a year as preferred shareholders but their ultimate reward may be limited. "I can imagine the sales pitch about how lucky the LPs are to get a chance to provide leverage for their own investment, but I doubt I'd be convinced," Marks said.
A representative for SoftBank declined to comment.
SoftBank continues to sprinkle millions of dollars all over the globe.
Just this week, there were reports that SoftBank was seeking stake in Uber, that it was funneling millions into the co-working space startup WeWork for Chinese expansion, and that it was leading an investment in Slack, the chat service for businesses.
Still, Marks said he sees the ability for SoftBank to be this busy as another example of a market that's overheated.
"The willingness of investors to invest in a shockingly large fund for levered tech investing with a questionable structure is a further indication of an exuberant, unquestioning market," Marks said.