Rupert Murdoch's media group News Corp. Ltd. on Thursday said it was freezing new investments in young technology companies in Europe by capping contributions into a fund set up a year ago.
The fund, ePartners, said it was limiting its investment to just $130 million, reducing it to just 20 percent of the $650 million that was to be committed by investors. Investors will be released from the balance of their capital commitments.
"We raised our funds in a very different economic climate than we find ourselves in today," said Mark Booth, managing director of epartners.
"We do not believe that new investments can generate the type of returns we expected at this time," he added.
EPartners also said it was selling off its 40 percent stake in a separate fund it created with Japan's Softbank Corp. to invest in technology companies in the United Kingdom. The Japanese firm was buying back the stake.
Separately, Softbank said it was merging its UK fund, SOFTBANK UK Ventures, with its other European fund, SOFTBANK Europe Ventures.
The two funds, which were valued at over $1 billion when they were unveiled last year with much fanfare, will now manage around $600 million out of its offices in London, Paris and Munich.
Founded by President and Chief Executive Masayoshi Son, Softbank's fund was hailed as a big shot in the arm for Europe's technology industry aiming to invest in wireless firms and Internet start-ups.
REMAINS BULLISH BUT NO DOT-COMS
The combination of Softbank's funds and Murdoch's pullout came after several venture capital funds worldwide have been hurt by the burst of the Internet bubble.
Softbank, however, maintained that it had moved away from just dot-coms and was investing in firms with strong technologies, with Europe offering several opportunities.
"We continue to be very interested and bullish in technological investments in Europe," Eric Hippeau, president of Softbank International Ventures, told Reuters from New York.
He said Softbank was merging its 10-member U.K. team with its European fund team and would focus on companies that had original technology, mainly linked to next-generation wireless.
He said European media group Vivendi Universal will continue to be its partner in the European fund. So far, the two funds have invested in 13 companies.
Thursday's pullout was another setback for Murdoch's cyber plan, which he initiated later than his rivals. He started his Internet operations three years ago, putting his son, James, in charge, with Booth also playing a key role.
The joint venture with Softbank was meant to bolster the business in Europe but faced an immediate setback when he lost Chief Executive Diana Noble, reportedly due to differences on strategy.