Carlyle launches $1bn Japan fund

Co-founder David Rubenstein will lead the firm's fundraising effort for the country while the recent economic reforms boost investor sentiment.

The Carlyle Group has officially launched its third Japan-focused fund, registering the vehicle with the US Securities and Exchange Commission, according to a SEC filing from late July. Carlyle Japan Partners III is a Cayman Islands registered fund.

The filing did not disclose the size of the fund. But a source close to the matter told Private Equity International it will be JPY 100 billion (€769 million; $1.02 billion). 

Carlyle declined to comment on fundraising. 

The new fund aims to raise less than the firm's previous $1.68 billion Japan vehicle, which has a 2006 vintage, according to PEI's Research & Analytics division.

CJP II is currently tracking a return multiple of 1x and net IRR of 5 percent, the firm said at its fourth quarter earnings call in February. Carlyle Japan Partners I, a 2001 vintage fund that is fully invested, posted a multiple of invested capital of 2.8x and net IRR of 37 percent,

Co-founder and head of the firm’s fundraising efforts, David Rubenstein, also noted its plans for a new vehicle on the earnings call.

“We've talked preliminarily to Japanese investors about a new fund, and we feel that there's a lot of interest in it. We don't know what the size will be, but probably by sometime this year we would be looking at something new in Japan,” he said. 

The rate of contraction in Japan seems to have moderated significantly since October. This fact, coupled with the Japanese central bank's newly accommodated monetary policies, has improved our outlook for Japan.

William Coway, co-founder, The Carlyle Group

Carlyle is one of many global funds reaffirming interest in Japan after bold economic reforms initiated by Prime Minister Shinzo Abe, which included a $116 trillion stimulus package, boosted investor confidence. 

“The rate of contraction in Japan seems to have moderated significantly since October. This fact, coupled with the Japanese central bank's newly accommodated monetary policies, has improved our outlook for Japan,” William Conway, co-founder of Carlyle, explained earlier. 

In Japan, Carlyle looks at businesses worth $100 million to $150 million but avoids big auction deals and investments in companies with more than 1,000 employees, Tamotsu Adachi, managing director of the Carlyle Group in Japan, told PEI in an earlier interview.

Kohlberg Kravis Roberts has also expressed a revived interest in Japan’s private equity opportunities as it closed its second Asia Pacific vehicle on $6 billion – a portion of which is expected to be deployed in the country. 

The firm had a strong exit in the country during 2012, selling Japanese recruitment firm Intelligence to Temp Holdings for $720 million, gaining 5.4x its costs, according to the firm.

Scott Nuttall, head of the global capital and asset management group, said on a recent earnings call, “Japan is looking a bit more active as well. It's hard to predict where that goes. But as that market opens up, there's meaningful opportunity there. So I'd say the pipeline is strong and broad-based.”