Emerging markets in Asia such as China, India, and ASEAN have received much interest from both investors and fund managers alike. As a result, interest in more developed Asian markets such as Japan has seemingly subsided. However, recent Japan-focused private equity (excluding real assets, fund of funds, secondaries) fundraising trends suggest otherwise.
Japan-focused private equity funds, which either have a sole focus on Japan or include the country as part of their general investment mandate, decreased from 2008 to 2010 in terms of fundraising figures. The aggregate capital raised by Japan-focused private equity funds dropped sharply from $13.4bn in 2008 to $478mn in 2010. Japan-targeted fundraising, however, picked up in 2011 and garnered $3.4bn in total capital commitments. Funds with an allocation to Japan collectively raised $4.0bn in aggregate capital for 2012, marking a 17% increase from the previous year. The increased interest in Japanese private equity is even more prevalent when looking at private equity funds that have a sole focus on Japan. In 2012, Japan-only private equity funds secured $1.0bn in aggregate LP commitments, which is more than 2.5 times the amount garnered by similar funds the previous year.
As Japan is a mature private equity market, it is not surprising that buyout funds are most favoured by private equity investors seeking additional exposure to Japan. In 2012, these funds collectively accounted for 78% of the capital raised by Japan-focused private equity funds. The next most prominent fund type is venture capital. Venture capital funds, which comprise of both stage-specific and generalist funds, raised closed to 8% of the total capital commitments secured by Japan-focused private equity funds. Other significant fund types that successfully held a final close in 2012 include mezzanine, growth, and distressed strategies.
Japan-based fund managers enjoyed greater success in raising Japan-focused private equity funds as compared to their offshore peers in the period 2008 to 2012. They accounted for more than 65% of the LP capital commitment pool in most years except 2011, of which Japanese GPs raised slightly less than 60%. 2012 represents a particularly successful Japan-focused fundraising year for domestic fund managers as they gained 82% of LP capital commitments in that year.