New Japan funds to the fore

Kaleido Holdings and Valiant Holdings, two buyout groups founded by former executives of MKS Partners, are making progress.

As Japanese private equity continues to evolve, new local fund managers are developing their market positions.

Kaleido Holdings and Valiant Holdings, two Tokyo-based investment firms that were established in September 2004 and April 2006 respectively, are representative of second-generation Japanese private equity firms. Both are tracing their roots back to MKS Partners, one of Japan's longest-established buyout operators.

Kaleido is led by Takaaki Kawashima, a former co-managing partner of MKS, and is currently raising its second fund. Following its inception, Kaleido raised an undisclosed amount of capital from Japanese financial institutions within three months of its launch, according to Masanori Akiba, a partner at the firm.

Since the fund closed in December 2004, Kaleido has announced three investments totaling ¥17.6 billion, Akiba said. Its largest deal to date is a ¥10 billion investment for a 23 percent stake in Renown, a fashion group that owns UK luxury brand Aquascutum. Last year, Kaleido acquired a 34 percent stake in Nai Kai Zosen, a Japanese shipbuilder, for ¥3.6 billion.

For its second fund, Kaleido is thinking about including foreign LPs in its marketing effort.

Valiant was created by Ken Kato, Ayumi Sakurai and Daisuke Shintani, two former partners and a principal at MKS. The firm hopes to close its maiden fund by summer.

The fund, which has a ¥15 billion ($130 million) target, had a first close in October 2006 on ¥4 billion, Sakurai told PEI Asia in an interview.

Sakurai said the target size of the debut fund is similar to a ¥17 billion Japan Venture Fund he managed while at MKS. That fund, which held a final close in 1998, was raised while MKS was still part of the London-based Schroder Ventures group of country funds. The group spun out of Schroder Ventures in 2002.

Valiant is looking at making equity investments of ¥1 billion to ¥2 billion in return for majority stakes in businesses with enterprise values ranging from¥ 5 billion to ¥10 billion.

Fundraising efforts have, thus far, been confined to Japanese limited partners. Sakurai explained that with a team of five investment professionals and one assistant, Valiant has limited resources to pursue deals and raise funds from foreign institutional investors simultaneously, although “several LPs overseas have expressed interest”.