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> Due to this - "SoftBank racks up $3.7bn in losses at tech stock trading unit": https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9 https://www.ft.com

> Due to this - "SoftBank racks up $3.7bn in losses at tech stock trading unit": https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9 https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9... Ugh, I hate it when PNL is reported in pure dollar terms with no reference to capital. I get it, the writer/editor wants to make the title punchy, and $4 billion is certainly punchier than say 4%. However, FT is in some way supposed to cater for professionals and I would expect better from them. For actual informed use, the dollar numbers is largely meaningless. For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over.

itsoktocry 6y ago
>For actual informed use, the dollar numbers is largely meaningless. You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. >For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over. Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size.
- xwolfi 6y ago
  The fund size itself means positions will spread out to risky assets and the more money you try to put to work, the more risk you're gonna take. They lost 4% of their unmanageable capital, big deal.
- HighlandSpring 6y ago
  >You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. Even "actual informed people" won't necessarily know how much much any given fund has in AUM. >Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. Actually, fund size is very relevant. Losing $3.7b as a $10b fund will put you in at least 37% drawdown which can put you past a board-controlled threshold at which trading might pause or a re-evaluation of the trading strategies might be triggered. Losing $3.7b on a $100b account is 3.7% which is business as usual really. If you have a machine learning background this analogy might be useful: if you're building an algo trading strategy then training your model on absolute dollar returns data will be nonsense. What makes more sense is calculating the relative returns or even log-returns because then we're encoding an actual relative change.
- JumpCrisscross 6y ago
  You have a good point. But anyone following the SoftBank story within the context of Elliot’s activism is thinking about SoftBank Corp. from an earnings perspective and Vision Fund from a returns perspective. (The latter being easy to translate given its Fund 1 $100bn base.)
- short_sells_poo 6y ago
  I don't believe I have it backwards. Without trying to appeal to authority, I work in the industry and except in very specific cases where it is clear how much AUM a particular fund runs, people will quote percentage returns because it tells you immediately what is the severity. I'm sorry but nobody can keep all the different AUMs in their head. There are thousands (tens of thousands?) of funds in the world, I really can't be bothered to memorize all their assets. The headline was clearly written to elicit an emotional response, at the expense of information content. > Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. It's not good, but again the dollar figure is completely meaningless: if the fund has an AUM of $100bln, this is a largely inconsequential -4%, which may compare unfavorably to their peer group and may elicit management changes down the line. For a $10 bln fund this is pretty much game over and they would be gearing for a fire sale of office equipment.
  - maest 6y ago
    > Without trying to appeal to authority, I work in the industry Fun fact, this is called "apophasis". https://en.wikipedia.org/wiki/Apophasis https://en.wikipedia.org/wiki/Apophasis I'm not attacking the OP (or is this another apophasis?), especially since they expand on what they mean later in their reply; I just like the word.
  - whatok 6y ago
    In a lot of cases, reporters do not have access to AUM or want to extrapolate from potentially misleading sources in order to construct a percentage return that does not exist publicly. You don't see reporters attempt to extrapolate dollar returns from percentage ones when percentage ones are all that are available; even if dollar returns might make a better headline like you claim. A headline with an extrapolated percentage return would have to be phrased in an awkward manner like "could be down as much as" and an editor is not going to greenlight that. This isn't even broaching the subject of gross vs net percentage returns which isn't possible to succinctly address in a mere headline.
  - jjeaff 6y ago
    >The headline was clearly written to elicit an emotional response, at the expense of information content. These days, I'm ok with any headline that isn't a complete fabrication or at best, completely misleading.
soVeryTired 6y ago
I think this is a different arm of SoftBank though, not the vision fund. Also, even capital is sort of irrelevant because of gearing. I can go to the futures market and take the same risk with a $10m fund that you can with a $20m fund in the cash equity market.
wpietri 6y ago
Depends on the use. If you're evaluating the fund from an ROI perspective, sure. But the mental math I'm doing is how many perfectly good entrepreneurs could have gotten funded with that money.
- fakedang 6y ago
  For another perspective, two blockbuster drugs could have been funded from start to finish.
- short_sells_poo 6y ago
  But this is exactly what I mean: the title is worded to elicit an emotional response - and it clearly succeeds at that. This is FT however, I'd expect them to be professional enough to avoid this crappy game of clickbait titles. If the NY Post wrote a headline like "SoftBank suffers a massive $4 billion loss!!!111" I wouldn't bat an eyelid. From a purely informational perspective, this headline doesn't tell me anything about the actual severity of this loss for SoftBank.
  - wpietri 6y ago
    Sorry, I don't agree. Billions of dollars lost are still billions of dollars lost. I agree that some people will want to know in percentages of this or that, and you are clearly one of those people. But you're not their only reader, and I think it's reasonable and appropriate for people to have an emotional response to somebody gambling and losing the equivalent of the lifetime earnings of a couple thousand people.
    - short_sells_poo 6y ago
      Context is very important because otherwise you can't claim that the money could've been feasibly spent better and can't even distinguish between loss from gross incompetence or just normal fluctuations. The Norwegian Govt Pension Fund manages $1 trillion of assets. It's value is likely to fluctuate by billions each day. Would you level the same accusations against them? Size matters tremendously for these things.
smachiz 6y ago
>One recent development at SoftBank that worries some in Elliott is a new asset-management arm Mr. Son announced in mid-August as cash piled up, to which he will contribute himself. He now personally directs a team of traders using $20 billion of the cash pile to bet on daily moves in tech names including Alphabet Inc., Amazon.com Inc. and Netflix Inc., said people familiar with his trading. It's ~$20B, though they had market exposure of over ~$50B.
- jariel 6y ago
  I'm from outside the industry, but this seems outright bonkers to me, like completely unprofessional. Mega fund managers using $20B like a Robin Hood account for day trades? Unless he literally has quasi inside information, this seems wrong.
  - jeffshek 6y ago
    I sort of wonder how much of this is embellished. Most of the time risk management products will try to stop this.
    - jariel 6y ago
      I'd have to think the internal risk team at SoftBank is not going to do anything but 'warn' the partners. If the parnters believe in their own koolaid ... (hey, we are 'world class investors, look how much money we raised') it's an easy trap for them to fall into. Paradoxically - even just being a 'true series D/E fund before IPO' is a really great concept, they should stick to it. WeWork, Uber etc are actually good investments if managed properly. If they reigned in Adam at WW it might have worked out better.
    - Traster 6y ago
      Softbank has gone from 0 to $20Bn day trading in 6 months. I doubt their riks management is up to scratch to be honest. It's one thing to be evaluating single large long-term investments with seats on the board etc. It's quite another to be day trading options.
yskchu 6y ago
Seems many of the replies below this are referring to this post, so I'll reply here: 1) FT seemed to have changed the headline, it used to be "SoftBank’s Northstar tech unit racks up $3.7bn in losses" (refer to archive link below), which was much more specific. The article contents are the same however - many comments below refer to $100B, however the article does not refer to Vision Fund $100B; it refers to their new "speculative trading" division, which was officially announced back in August. 2) Since this is FT, probably most people don't have access to the article due to paywall - the article itself: http://archive.vn/8NAW7 http://archive.vn/8NAW7 3) The loss is significant, it is not 4%. When Northstar started, Softbank announced it started with $555 million; however as of Wednesday announcement now they say Northstar manages 21B of Softbanks 43B cash pile. 3.7B quarter loss is 17.6% of 21B 4) FT has been reporting on Softbank trading for some months now - it was one of the first (or the first) to break the news about Softbank large speculative call options trades back in September (https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2 https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753...) 5) Finally, this is my personal opinion. Softbank seemed to have built up a reputation for throwing money at companies at high valuations, with some disastrous consequences (Wework etc). Now, it seems they are approaching trading with the same cowboy attitude; these high risk trades may work some of the time, when the market is in your favour, but when the wind changes, big losses may incur - this FT report is one indication of such losses.

itsoktocry 6y ago

>For actual informed use, the dollar numbers is largely meaningless. You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. >For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over. Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size.

xwolfi 6y ago
The fund size itself means positions will spread out to risky assets and the more money you try to put to work, the more risk you're gonna take. They lost 4% of their unmanageable capital, big deal.
HighlandSpring 6y ago
>You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. Even "actual informed people" won't necessarily know how much much any given fund has in AUM. >Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. Actually, fund size is very relevant. Losing $3.7b as a $10b fund will put you in at least 37% drawdown which can put you past a board-controlled threshold at which trading might pause or a re-evaluation of the trading strategies might be triggered. Losing $3.7b on a $100b account is 3.7% which is business as usual really. If you have a machine learning background this analogy might be useful: if you're building an algo trading strategy then training your model on absolute dollar returns data will be nonsense. What makes more sense is calculating the relative returns or even log-returns because then we're encoding an actual relative change.
JumpCrisscross 6y ago
You have a good point. But anyone following the SoftBank story within the context of Elliot’s activism is thinking about SoftBank Corp. from an earnings perspective and Vision Fund from a returns perspective. (The latter being easy to translate given its Fund 1 $100bn base.)
short_sells_poo 6y ago
I don't believe I have it backwards. Without trying to appeal to authority, I work in the industry and except in very specific cases where it is clear how much AUM a particular fund runs, people will quote percentage returns because it tells you immediately what is the severity. I'm sorry but nobody can keep all the different AUMs in their head. There are thousands (tens of thousands?) of funds in the world, I really can't be bothered to memorize all their assets. The headline was clearly written to elicit an emotional response, at the expense of information content. > Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. It's not good, but again the dollar figure is completely meaningless: if the fund has an AUM of $100bln, this is a largely inconsequential -4%, which may compare unfavorably to their peer group and may elicit management changes down the line. For a $10 bln fund this is pretty much game over and they would be gearing for a fire sale of office equipment.
- maest 6y ago
  > Without trying to appeal to authority, I work in the industry Fun fact, this is called "apophasis". https://en.wikipedia.org/wiki/Apophasis https://en.wikipedia.org/wiki/Apophasis I'm not attacking the OP (or is this another apophasis?), especially since they expand on what they mean later in their reply; I just like the word.
- whatok 6y ago
  In a lot of cases, reporters do not have access to AUM or want to extrapolate from potentially misleading sources in order to construct a percentage return that does not exist publicly. You don't see reporters attempt to extrapolate dollar returns from percentage ones when percentage ones are all that are available; even if dollar returns might make a better headline like you claim. A headline with an extrapolated percentage return would have to be phrased in an awkward manner like "could be down as much as" and an editor is not going to greenlight that. This isn't even broaching the subject of gross vs net percentage returns which isn't possible to succinctly address in a mere headline.
- jjeaff 6y ago
  >The headline was clearly written to elicit an emotional response, at the expense of information content. These days, I'm ok with any headline that isn't a complete fabrication or at best, completely misleading.

soVeryTired 6y ago

I think this is a different arm of SoftBank though, not the vision fund. Also, even capital is sort of irrelevant because of gearing. I can go to the futures market and take the same risk with a $10m fund that you can with a $20m fund in the cash equity market.

wpietri 6y ago

Depends on the use. If you're evaluating the fund from an ROI perspective, sure. But the mental math I'm doing is how many perfectly good entrepreneurs could have gotten funded with that money.

fakedang 6y ago
For another perspective, two blockbuster drugs could have been funded from start to finish.
short_sells_poo 6y ago
But this is exactly what I mean: the title is worded to elicit an emotional response - and it clearly succeeds at that. This is FT however, I'd expect them to be professional enough to avoid this crappy game of clickbait titles. If the NY Post wrote a headline like "SoftBank suffers a massive $4 billion loss!!!111" I wouldn't bat an eyelid. From a purely informational perspective, this headline doesn't tell me anything about the actual severity of this loss for SoftBank.
- wpietri 6y ago
  Sorry, I don't agree. Billions of dollars lost are still billions of dollars lost. I agree that some people will want to know in percentages of this or that, and you are clearly one of those people. But you're not their only reader, and I think it's reasonable and appropriate for people to have an emotional response to somebody gambling and losing the equivalent of the lifetime earnings of a couple thousand people.
  - short_sells_poo 6y ago
    Context is very important because otherwise you can't claim that the money could've been feasibly spent better and can't even distinguish between loss from gross incompetence or just normal fluctuations. The Norwegian Govt Pension Fund manages $1 trillion of assets. It's value is likely to fluctuate by billions each day. Would you level the same accusations against them? Size matters tremendously for these things.

smachiz 6y ago

>One recent development at SoftBank that worries some in Elliott is a new asset-management arm Mr. Son announced in mid-August as cash piled up, to which he will contribute himself. He now personally directs a team of traders using $20 billion of the cash pile to bet on daily moves in tech names including Alphabet Inc., Amazon.com Inc. and Netflix Inc., said people familiar with his trading. It's ~$20B, though they had market exposure of over ~$50B.

jariel 6y ago
I'm from outside the industry, but this seems outright bonkers to me, like completely unprofessional. Mega fund managers using $20B like a Robin Hood account for day trades? Unless he literally has quasi inside information, this seems wrong.
- jeffshek 6y ago
  I sort of wonder how much of this is embellished. Most of the time risk management products will try to stop this.
  - jariel 6y ago
    I'd have to think the internal risk team at SoftBank is not going to do anything but 'warn' the partners. If the parnters believe in their own koolaid ... (hey, we are 'world class investors, look how much money we raised') it's an easy trap for them to fall into. Paradoxically - even just being a 'true series D/E fund before IPO' is a really great concept, they should stick to it. WeWork, Uber etc are actually good investments if managed properly. If they reigned in Adam at WW it might have worked out better.
  - Traster 6y ago
    Softbank has gone from 0 to $20Bn day trading in 6 months. I doubt their riks management is up to scratch to be honest. It's one thing to be evaluating single large long-term investments with seats on the board etc. It's quite another to be day trading options.

yskchu 6y ago

Seems many of the replies below this are referring to this post, so I'll reply here: 1) FT seemed to have changed the headline, it used to be "SoftBank’s Northstar tech unit racks up $3.7bn in losses" (refer to archive link below), which was much more specific. The article contents are the same however - many comments below refer to $100B, however the article does not refer to Vision Fund $100B; it refers to their new "speculative trading" division, which was officially announced back in August. 2) Since this is FT, probably most people don't have access to the article due to paywall - the article itself: http://archive.vn/8NAW7 http://archive.vn/8NAW7 3) The loss is significant, it is not 4%. When Northstar started, Softbank announced it started with $555 million; however as of Wednesday announcement now they say Northstar manages 21B of Softbanks 43B cash pile. 3.7B quarter loss is 17.6% of 21B 4) FT has been reporting on Softbank trading for some months now - it was one of the first (or the first) to break the news about Softbank large speculative call options trades back in September (https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2 https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753...) 5) Finally, this is my personal opinion. Softbank seemed to have built up a reputation for throwing money at companies at high valuations, with some disastrous consequences (Wework etc). Now, it seems they are approaching trading with the same cowboy attitude; these high risk trades may work some of the time, when the market is in your favour, but when the wind changes, big losses may incur - this FT report is one indication of such losses.