Japan wakes up to private equity

published 9 July 2021

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Private-equity investors spy bargains in Japan, says Jacky Wong in The Wall Street Journal. Private-equity funds invest in private companies or buy out publicly listed ones. Fund managers have been amassing a war chest.

“Total assets under management in Japan-focused private equity amounted to $35bn as of September last year... double the sum at the end of 2015.” The funds have $14.9bn of cash to deploy.

Corporate-governance reform is making Japan more appealing to foreign investors. Japan’s “smaller family-controlled… companies without a successor” also offer rich pickings.

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Cheap financing from Japanese megabanks is augmenting the trend, Kazuhiro Yamada of private-equity group Carlyle tells the Financial Times. There have been 25 private-equity deals in Japan this year, worth $8.6bn, compared with $9.5bn for the whole of 2020, say Kana Inagaki and Leo Lewis in the Financial Times.

Hedge funds are also getting in on the act, says Bei Hu on Bloomberg. Japan’s small venture-capital industry means many of its start-ups list on public markets earlier than in other countries. That can cap the firms’ growth: “companies often get stuck with a market value below $300m and limited trading volume”.

Japan, the world’s third-largest economy, has a mere six “unicorns” (a private start-up business with a value of over $1bn). More hedge-fund interest could change that.

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.