Private Equity in Japan: Opportunities, Trends & the Role of Data


Private Equity in Japan: Opportunities, Trends & the Role of Data
By Chiaki Tanioka, Senior Associate 

Last month, the 18th annual AVCJ Private Equity & Venture Forum Japan took place in Tokyo. More than 450 participants -- including Japanese LPs, domestic and international GPs, asset managers, lawyers/consultants and market information providers -- assembled to discuss the current and future state of Japan’s private markets. With 1.5 times as many attendees than past conferences, the scale of this year’s event was indicative of the growing attention being paid to the Japanese PE market.

The conference included a number of interesting presentations and panels featuring executives from a number of leading firms, including Hamilton Lane. Tomoko Kitao, Managing Director and head of our Tokyo office, delivered an executive address titled “Utilization of Data in the PE Market: Approach for constructing an optimal portfolio.” Starting with the premise that she believes there is still more “art” than “science” in alternative investment management – especially compared to the public markets – Tomoko introduced Hamilton Lane Data, which captures approximately $3 trillion in fund-level commitments as of March 31, 2017, and provided a perspective on how to leverage this data for optimal portfolio construction. The presentation was well received by both GPs and LPs, which we see as an encouraging indication of interest in using data in PE investing.

Katsushi Sakurai, Vice President at Hamilton Lane, participated in the LP-GP panel titled, “Developing Long-Term Partnerships.” The panelists discussed the unique characteristics of Japanese LPs, including the notably high level of turnover at the CIO level due to role rotation within companies, which can be common in this region. They also addressed common challenges and the necessary steps for building solid, trusting relationships between LPs and GPs, and acknowledged the role of ILPA (International Limited Partnership Association) and the importance of systematic knowledge-building within respective teams.

In another session, which featured both local and global GPs that are actively investing in Japan, panelists discussed the strong pipeline of carve-outs and business succession deals, particularly in the mid-market. They also agreed that there is a favorable change of atmosphere among targeted companies, making it easier for them to accept third-party equity. Another panel, led by major local LPs, discussed the challenges in setting up a PE program and their various philosophies around portfolio building, which shed light on the needs and considerations of Japanese LPs.

The AVCJ Japan participants shared meaningful viewpoints on market trends, investment opportunities in Japan and LPs’ views related to alternative assets. Such active participation is an encouraging sign that the Japanese private markets continue to expand and evolve both as an investment destination and in the composition of its investor base.

Tomoko AVCJ

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