One model of monetary policy is:
- When interest rates are zero, someone at SoftBank Group Corp. sits around saying “how can we make any money on investing” and doodling words on a legal pad, and when she has enough words she holds the pad up at arm’s length and picks the first three she sees, and they are “robot” and “pizza” and “truck,” and she goes to her bosses and says “robot pizza trucks?” and they say “sure, that sounds crazy enough that it might get us a double-digit return,” and SoftBank invests in a robot pizza truck startup.
- When interest rates rapidly rise to 5%, startups with real products and recurring cash flow can’t go public, need to borrow money and will pay 12% interest for it, and SoftBank is like “sure that’s fine, 12% will do.”
When rates are zero, people invest in far-future long shots. When rates are high, people make loans to actual businesses. Anyway:
SoftBank Group Corp. is working on plans to become a lender in the $1.5 trillion world of private credit.
Senior investors at the Japanese firm have spoken to market participants about directly lending to technology firms, and touted the possibility of deploying as much as $1 billion via SoftBank Investment Advisers, according to people with knowledge of the matter. …
Deep-pocketed investors are finding opportunities providing debt to tech firms, especially as large software companies stay private for longer. There’s also a hole in the market left by Silicon Valley Bank, which had been a major provider of debt funding to startups before its collapse.
SoftBank is targeting low double-digit yields for the strategy, the people said, which is roughly the same as what most direct lending funds expect to earn.
I remember when SoftBank used to target “curing human sadness,” not low double-digit yields, but that is what monetary policy can do.