Report: Nomura to raise $495m fund of funds

The Japanese securities giant will invest in Asia-Pacific private equity funds as the Asian buyout boom continues.

Japanese investment bank Nomura Holdings is reportedly planning to raise a $495 million (€313 million, ¥50 billion) fund of funds exclusively focussed on the Asia-Pacific region.

The fund will be advised by Private Equity Funds Research and Investments (PEFRI), an advisory unit Nomura helped set up in October, according to a Bloomberg report. Nomura owns 65 percent of PEFRI.  

Nomura declined comment.

In preparation of the fund of fund’s launch, Nomura has been meeting with 20 funds in China; 20 Indian fund managers; 20 funds in Australia and New Zealand; 10 Southeast Asian fund managers; five Taiwanese funds; 10 South Korean funds; and 30 funds in Japan, PEFRI president Junichi Ebata told Bloomberg.   

The fund, which will begin operating in October, will charge investors a management fee of 1.25 percent, but won’t charge a performance commission. PEFRI hopes for a 15 to 20 percent internal rate of return on the fund of funds.  

Nomura, Norinchukin Bank, and Development Bank of Japan formed PEFRI earlier this year to advise professional investors on potential private equity opportunities.

The report comes as little surprise to many Asian private equity observers, who have witnessed substantial growth in fundraising, deal sourcing, and indigenous LP activity over the last several years.

While big buyout activity in Western markets has stagnated following the subprime crisis and the collapse of cheap leverage, the first quarter of 2008 witnessed 10 percent growth in the number of private equity-led Asian buyouts over the same period last year, according to Dealogic.  

More and more, US and European firms are expanding their offices or establishing a new presence in the region. Within the past three months, London-based Permira and Florida-based Sun Capital Partners have both announced plans to open offices in Hong Kong and Shanghai, respectively.

Nomura is no stranger to private equity. Its in-house private equity arm, Nomura Principal Finance, is highly active in Japanese corporate buyouts and recapitalisations, managing more than $88 million. Its current private equity arm is in fact a second in-house group, as its first, led by Guy Hands, spun out in 2002 to form UK private equity shop Terra Firma Capital Partners.