Japan’s gargantuan new university endowment fund must overcome domestic hiring challenges before making its first direct private equity commitments.
The ¥10 trillion ($80.7 billion; €74.3 billion) fund, which is managed by the Japan Science and Technology Agency, will initially rely on gatekeepers until it has enough internal resources to invest directly, Yasuyuki Tomita, who joined the fund as head of private equity investments last month, told Private Equity International. It is in the process of screening potential gatekeepers before issuing a formal request for proposals.
JST will gradually increase its allocation to direct fund commitments, Tomita added.
“Our team is only four people – it’s a quite small number,” he said. “In the near future, we want to do direct investments to funds; to achieve this, we will increase that number of staff. Even in the future, we have to utilise fund of funds in some of the strategies in which we do not have enough [resources] or expertise.”
Tomita joined the team after two decades at Development Bank of Japan, where he launched an asset management business in private equity and infrastructure. He reports to Tadasu Matsuo, a former co-head of HarbourVest‘s Japan office, who joined the endowment fund as head of global alternative investment in January, PEI reported at the time. They are accompanied by chief investment officer Masakazu Kita, a former manager at Norinchukin Bank, according to Bloomberg.
“Experienced people are running out in the Japanese PE market, so I want to hire more, but I feel this is quite a challenge,” Tomita added. “The number of LP professionals is very limited in Japan. I have nearly 20 years’ experience in [private investments], but that’s quite rare.”
The endowment has been tasked with targeting 4.38 percent each year, a goal that “seems not easy to achieve considering the current market environment”, Tomita said. “Therefore, we will have to allocate a sizable portion to alternatives”. He declined to share specific allocation targets, citing confidentiality.
University endowments have pedigree when it comes to alternative assets, representing nine of the 100 largest private equity investors globally, according to PEI’s Global Investor 100. The most bullish of these, Yale University, has allocated 41.6 percent – or about $13 billion – to the asset class.
“In the long run, each university in Japan will manage their own endowment,” Tomita said. “It takes time, but I want to contribute to making such an ideal endowment market in Japan, and this is the first step. From a longer-term perspective, I want to work with and educate younger staff, and then I believe LP talent will increase more.”