Square pegs and round holes: Partnerships and trusts in Japanese PE fund structures

Singapore partners John Rogers and Thomas Granger have recently been discussing private equity fund structures with Asian-Mena Counsel Offshore Update. 

Statistics from Japan over the past couple of years regarding private equity (PE) and venture capital (VC) investment have been impressive. In 2017, there was a 15x year-on-year increase in dry powder raised, a 30 percent increase in the number of funds launched and the value of deals executed more than double.

The drivers behind this growth are varied. Increased interest from overseas; and a shift in mindset to greater acceptance of PE among domestic investors, coupled with negative interest rates and lacklustre performance of other investments are named as contributing factors. However, Japanese domestic banks and pension funds allocating billions to the space is the headline that grabs most attention.

Not surprisingly, the interest of such allocators has had the knock-on effect of determining how some funds are structured, resulting in departures from global trends and the emergence of what has been referred to as the “private equity-style unit trust” (PESUT). This should not come as a surprise, as demands of large investors typically impact investment structure. However, there are questions as to whether the PESUT is a one-size-fits-all or if it is hammering a square peg into a round hole. 

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This article was published in the Oct 2018 edition of Asian-mena Counsel, In-House Community.