The move comes as Epartners, an investment arm for media giant News Corp., said it is cutting its commitment to the Epartners2 fund by 80 percent. Epartners was an investor in Softbank UK Ventures.
"We're still committed to Europe," said Alyson Nolan, a Softbank International Ventures spokeswoman. "Epartners is pulling out of the fund and that's their decision. Their pullout is part of the reason to merge the two funds."
Softbank UK Ventures, a fund with $450 million in commitments, is slightly smaller than Softbank Europe Ventures, which has $500 million in commitments.
The funds had $950 million in combined commitments from investors, but Epartners, Softbank and other limited partners will be reducing those commitments by $350 million. Epartners is scaling back by $150 million, while Softbank and the other partners are pulling back by $100 million each.
Both funds were created last year and, at the time, some investors had questioned the need for two European funds.
In a statement Thursday, Epartners said its Epartners2 fund would be capped at $130 million, rather than its previous plan of $650 million.
"We raised our funds in a very different economic climate than we find ourselves in today," Mark Booth, Epartners managing director, said in the statement. "We do not believe that new investments can generate the types of returns we expected at this time, nor in the time frame we had planned on when we formed the Epartners2 fund nine months ago."
Softbank plans to purchase Epartners' 40 percent interest in Softbank UK Ventures as part of the merger. The funds had a combined total of 13 investments in technology companies.
"Over the past year, the Europe and UK funds have worked together on investment opportunities and on business development for our portfolio companies," Eric Hippeau, managing director of the combined fund, said in a statement. "By combining the two funds, we are strengthening our ability to fund and build the best technology companies in the region."
Nolan said the combined fund will likely invest in just as many companies as previously planned because of the depressed valuations companies now face.
Softbank and Epartners also announced that eVentures India will no longer invest in new companies, but rather just reinvest in select companies within its portfolio.
Eric Hippeau is a board member of CNET Networks, publisher of News.com.