As Japan’s $185 billion Pension Fund Association for Local Government Officials looks for a manager for private equity, Private Equity International’s Research & Analytics team looked into Japanese fundraising by local managers.
Financial turmoil led to a gradual decline in fundraising for Japanese private equity between 2009 and 2012. Only $700 million was amassed by Japan-headquartered managers in 2012, down from $2.82 billion in 2008.
In 2013, fundraising shot up to nearly six times the previous year’s figure, to $4.1 billion. This was due, in part, to three unusually large funds, the biggest of which was the Development Bank of Japan’sCompetitiveness Enhancement Fund at $1.53 billion.
The launch of this fund came after Shinzo Abe’s Liberal Democratic Party won its second term. He introduced an economic policy known as “Abenomics”. It was based on fiscal stimulus, monetary easing and structural reforms, and was well received by the market.
But fundraising dropped immediately in 2014, reaching its lowest point since the global financial crisis, at $520 million. Observers suggested the strengthening economy, meaning fewer distressed deals and high public valuation, or the realisation that the Abe administration would take longer than expected to have the desired impact, as causes for the drop.
Fundraising went back up in 2015 to $1.75 billion, showing investor confidence in Abenomics was growing. But 2016 may amass a larger total, and there are positive indicators. Huge funds like the Cool Japan Fund and the Nikko Citigroup Japan Fund, targeting almost $1.5 billion and $1 billion respectively, are in market, and six funds closed have already closed at the end of H1. This compares favourably with nine having closed in all of 2015.