Currently, private equity investors (excluding fund of funds managers and secondaries managers) worldwide have invested a total of over $1.3tn in private equity fund commitments. Of this amount, 2%, or $26bn, came from Japan-based LPs. Interestingly, out of the 115 Japan-based LPs, only 29% are seeking to invest solely in the Far East region. The remaining 71% will seek opportunities outside the Far East in regions such as Greater China, other parts of Asia, Australasia, Europe and North America. As such, LPs from Japan could represent a potential source of capital for GPs raising global funds.
The two most prolific investor types in Japan are banks and corporate investors. Other investor types include insurance companies, private sector pension funds, asset managers and investment companies. Japan-based banks and corporate investors that are interested in private equity fund investments have $5.4tn and $821bn worth of assets under management respectively. In terms of preferences, almost half of the Japan-based banks (45%) include buyout vehicles within their investment strategy, while only 4% of Japan-based corporate investors consider this fund type. Eighty-seven percent of Japan-based banks and corporate investors will consider venture fund opportunities. With regards to geographic preferences, it is worth noting that 70% of the Japan-based banks will only invest in the Far East region. However, 79% of the Japan-based corporate investors are willing to invest in private equity funds targeting outside the Far East region.
Japan-based LPs may still be on the conservative side when it comes to investing with first-time fund managers. Forty-nine percent will not invest with first-time fund managers while 29% will invest with such managers or spin-offs. The remaining 22% may consider opportunities offered by first-time fund managers.