Japan to invest $18bn in PE and VC via revamped firm

Japan Investment Corporation, a state-backed entity, is planning to launch private equity and venture capital funds next year.

The Japanese government is planning to invest at least ¥2 trillion ($17.6 billion; €15.5 billion) in funds that will make domestic and overseas direct investments.

Japan Investment Corporation, a revamped public-private fund created in September, will invest the capital across four vehicles: JIC-US, private equity, venture capital and “engagement”, managing director Toshio Yamauchi told Private Equity International.

JIC also aims to attract external capital from domestic and foreign investors for the funds, Yamauchi said. He noted that the organisation is still in the planning process for these vehicles and wants to collaborate with sovereign wealth funds, US-based endowments and global private equity funds as well as domestic financial institutions.

JIC launched the first of its four funds in October with its own capital. The $2 billion JIC-US Fund will target biotech and drug discovery companies mainly based in the US, the firm said in a statement. It will be managed from a JIC outpost in Silicon Valley and led by the firm’s deputy president Yasunori Kaneko.

The other three funds will co-invest alongside private equity and venture capital firms as well as Japanese corporations, and will launch by fiscal year 2019.

JIC has yet to decide on a target fund size for its private equity, venture capital and engagement funds.

Capital from the funds will target domestic and overseas companies designed for “society 5.0” – a government-led societal and digital transformation plan that will tap internet of things, artificial intelligence, cyber-physical systems and big data to make investments that address Japan’s ageing population.

Creating more Japan-born “unicorns” – start-ups valued at more than $1 billion – will also be a focus.

The “engagement” fund will be used “revitalise and improve the performance of Japanese corporations”. This will be done through constructive dialogues on corporate strategy with senior executives of the portfolio companies in line with the government’s initiative to encourage companies to enhance corporate governance, Yamauchi added.

On deal activity, Yamauchi noted that JIC will collaborate with Japanese private equity firms to enhance the financial performance of Japanese companies, and not compete for deals.

JIC is among a growing list of state-backed and private equity investors who have set up co-investment funds in the last year. Japan Post Investment Corporation, the private equity platform set up by Japan Post Bank and Japan Post Insurance in February, will have as much as ¥120 billion ($1.1 billion; €880 million) in investible capital. Nomura Holdings, meanwhile, relaunched its private equity unit in November last year, seeding an initial ¥100 billion.

JIC was born out of the state-backed Innovation Network Corporation of Japan.