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Japan-based investors allocating to alternatives grew by over 50% since 2019 — Preqin reports

9-in-10 Japan-based investors have positive outlook for private debt over the next 12 months

TOKYO, April 02, 2024 (GLOBE NEWSWIRE) -- Preqin, the global leader empowering the alternatives community with essential data and insight, published its Fundraising in Japan 2024: A guide to raising capital report. The report highlights that the number of Japan-based investors, actively investing in alternatives, grew by over 50% from 2019 to the start of 2024*. Preqin analysts find that the need for higher returns, especially in a low interest rate environment, propelled investors to look at the alternative asset classes.

Japan-based investors’ conservative approach

Although more investors based in Japan, such as pension funds, insurance firms, and banks, are actively allocating to alternatives assets to achieve higher returns, their target returns are typically modest compared to other investors globally. Preqin analysts note that Japan-based investors are generally conservative and adopt a relatively long-term approach to alternatives.

Japan-based investors maintain momentum in private debt allocations

Preqin’s latest investor survey from November 2023 found that Japan-based investors are most likely to increase their investment into private debt over the 12 months from November, over investment into other alternative asset classes. This aligns with other investors’ intentions globally. In addition to this, 90% of Japan-based investors foresee the asset class performing either the same or better over the 12 months from November. Most respondents believe that the macroeconomic cycle, and the equity and real estate market cycles, are at the start of a decline. In contrast, their outlook is more positive for the debt markets.

Angela Lai, VP, Head of APAC and Valuations, Research Insights, at Preqin, says: “Japan has long been a popular fundraising destination due to the presence of some of the largest allocators in the world, such as pension funds, insurance companies, and banks. While our investor survey shows that Japan-based investors tend to target lower returns and prefer less risky strategies, recent conversations with them reveal that this is slowly changing as they build their experience in proactively sourcing investments from a wider risk spectrum. Furthermore, newer groups of investors are emerging with potentially more flexibility to allocate, such as private wealth and retail segments, and this is attracting interest from fund managers worldwide.”

Additional key findings of the Fundraising in Japan 2024: A guide to raising capital include: 

  • Japan as an alternatives growth market: Preqin analysts predict that Japan’s large retail investor base offers further growth potential in the Japanese alternatives market. This is due to the high household savings balance in Japan of $14tn, and supportive government policies such as the recent move to allow investment trusts’ inclusion of unlisted shares.
  • Domestic private capital market not enough to meet all investor needs: Japan-based private capital funds now manage a total $115bn in assets, according to Preqin data as of June 2023. This is nearly double that of five years ago but still only equivalent to around 4% of Japan’s pension fund assets.
  • Japanese corporate pension funds and alternatives: Corporate pension funds with the capacity and expertise to actively manage alternative investments internationally often have greater flexibility to allocate 10% to 20%, according to Preqin data. This is high compared to public pensions in Japan, such as the Government Pension Investment Fund (GPIF) that has a 5% policy limit for alternatives.

Note to editors:

* Investors are counted for each asset class they are active in. So, the 50% growth in active Japan-based investors includes double-counting across asset classes in some cases. An investor active in private equity and venture capital will be counted twice, and that will be counted towards growth if this investor was only active in private equity in 2019.

If you would like more information or would like to speak with the report author, please contact Oliver Keyser at oliver.keyser@preqin.com.

About Preqin

Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment life cycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.


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