Development Bank of Japan will back impact funds and emerging domestic managers amid plans to increase its alternative assets under management, Private Equity International has learned.
The ¥17 trillion ($157 billion; €142 billion) government institution will implement the strategy as part of a three-year business plan starting 1 April, Yasuyuki Tomita, senior vice-president in DBJ’s growth and cross-border investment department, told Private Equity International.
Tomita, who was promoted from his position as managing director at DBJ Asset Management last year, will oversee the expansion of a domestic growth equity platform targeting small- and mid-cap businesses, he said.
The three-year plan will help to raise the bank’s exposure to Japan, which is “less competitive” than Europe and the US, Tomita added. He declined to comment on the size of DBJ’s proposed alternatives portfolio.
“When DBJ started PE investment in 2002, most PE managers in Japan raised [their] first-time funds supported by [the] DBJ as an anchor investor,” he said. “We hope to encourage new Japanese managers through our experiences and penetrate private equity culture more in Japan.”
DBJ has also completed more than 10 GP stake investments to date and will pursue more, Tomita said, declining to name individual firms.
The bank has already committed to Bridges Social Outcomes Fund II, a £35 million ($32 million; €29 million) impact investing vehicle managed by London’s Bridges Fund Management, according to a November statement. Unlike traditional private equity funds, BSOF II finances social impact bonds alongside government organisations.
“We would like to learn about [the] global trend of ESG to consider one of the future innovations in [the] Japanese financial market,” Tomita added. “We hope to take an initiative and promote the new trend. There is a government angle but it’s not [the] main purpose.”
Its compatriot, the ¥169 trillion Government Pension Investment Fund of Japan, has also become a major proponent of ESG in recent years under the stewardship of chief investment officer Hiromichi Mizuno.
DBJ has a 10 percent allocation to alternatives, according to PEI data. Its Japanese fund portfolio includes Globis Fund VI, Japan Industrial Solutions Fund II and DEEPCORE TOKYO I, while its global fund commitments include MBK Partners IV, Equistone Partners Europe Fund V and IK VII Fund.
“I ask GPs what their motivation is for continuing their business in 10 years, after they’ve made some money,” Tomita noted. “I also ask how they plan to develop their business; I’m a little cautious [of] firms [that] launch new strategies, which can lead to misalignment, so I check firm expansion is in a reasonable way.”