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Japan Post Bank establishes private equity arm

The new division will focus mainly on global buyout opportunities, Nakamura told Private Equity International.

Japan Post Bank, which manages a portfolio of about $1.7 trillion, has set up a private equity division, general manager, Masashi Nakamura, told Private Equity International.

The division will operate from the company’s head office in Tokyo and will focus mainly on buyout opportunities globally, he said. But other opportunities such as growth, venture capital and mezzanine will also be considered. Low yields and narrow credit spreads gave impetus to the decision to set up the new division.

The bank has named Tokihiko Shimizu as head of the new operation. He is a former welfare ministry bureaucrat who led the Government Pension Investment Fund's (GPIF) drive to diversify its portfolio allocation into alternative assets including private equity and property.

Lawyer, Naomi Aoyama of Debevoise & Plimpton LLP said: “Japanese people have not fully understood what private equity firms do, and have only recently come to understand that private equity deals may be good long-term investments. Now people have started to understand that many private equity funds can actually add value to the companies they invest in, for the long term. I think this will result in more private equity deals going forward, as investors learn more about private equity. The initiative from Japan Post is evidence of this trend.”

Japan Post Bank, which listed on the Tokyo Stock Exchange in November, has been in the spotlight since its president Masatsugu Nagato said it would consider investing in infrastructure, private-equity funds and overseas real-estate investment trusts.

According to research conducted by JP Morgan Asset Management in Japan, it is expected that Japanese pension funds will continue to increase their asset allocation to private equity. As a percentage of overall asset allocation in alternatives, private equity increased from 2.3 percent to 3.1 percent, from the beginning of 2013 to the beginning of 2014, as previously reported by PEI.