Japan-based Private Equity Investors – November 2013

by Jeviene Sim

  • 29 Nov 2013
  • PE

Following lower returns from more traditional investments, Japanese financial institutions are increasingly revisiting riskier alternative investments such as private equity. Within Abenomics, the economic policies advocated by Prime Minister Shinzo Abe, the Japanese private equity industry is now attracting increased interest from institutional investors in the region. In this blog, we take a look at the LPs who are interested in this space.

Preqin’s Investor Intelligence tracks a total of 123 Japan-based investors that are actively seeking commitments to private equity vehicles. The investors have aggregate total assets of over $13.6trn. In terms of investor type, banks and investment banks are the most common investor group among Japan-based private equity investors, representing 27% of the corpus. Corporate investors, insurance companies and private sector pension funds represent the next most significant groups of investors in this pool at 17%, 15% and 14% respectively. Following these investor types, the next most common are asset managers (7%), fund of funds managers (5%), investment companies and private equity firms (4% each). The remaining 7% is a mix of other investor types, including family offices, government agencies, investment companies and public pension funds.

Japan-based private equity investors have a significant preference for venture capital funds, with 55% of the corpus seeking to invest in this strategy. Forty-five percent of the investors have a preference for buyout funds, and growth funds are the next most preferred choice with 35% of the investors citing a preference for the strategy. This is followed closely by investors who will invest in distressed private equity at 33%, and, further by 18% of the corpus that have a preference in secondary funds.

In terms of geographic preference, a sizeable 81% of Japan-based investors in private equity have a geographic preference for investing within Asia, with 25% willing to only invest in the Far East region itself. Japan-based investors will also look outside the borders of Asia when committing to private equity vehicles. Forty-six percent of this investor pool target America as an investment destination while Europe remains attractive to 31% of these investors. Twenty percent of the group will target opportunities in a range of emerging markets. Furthermore, 7% of the corpus will also seek to invest in more unconventional locations such as Africa, Israel and the Nordic regions.

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