Side Letter: Japan’s LP shortage; ADDX’s wealth push; Border to Coast’s £4bn

Japan's newest LP giant is finding it tough to source experienced talent. Plus: Tokenisation platform ADDX has its sights set on Asia's wealth managers and a UK pension has earmarked billions for the private markets. Here's today's brief, for our valued subscribers only.

Just happened

Yasuyuki Tomita: Developing Japan’s LP ecosystem (Source: Norico Wood)

Lessons from a Japan veteran
Japan has developed a reputation in recent years as one of private equity’s most promising sources of institutional investor capital. Government Pension Investment Fund, for example, has earmarked $6 billion for the asset class, and Japan Post Bank has deployed more than $17 billion into PE in less than half a decade. While a seemingly expanding number of their domestic peers are hoping to follow suit, finding staff with the necessary acumen to execute those plans can be easier said than done.

The country’s brand new ¥10 trillion ($80.7 billion; €74.3 billion) university endowment fund is a case in point. Though the institution has big plans for alternatives and PE, its entry to the latter will be constrained initially by a lack of investor resources in Japan, PE head Yasuyuki Tomita tells Private Equity International in an interview this morning. “Experienced people are running out in the Japanese PE market, so I want to hire more, but I feel this is quite a challenge. 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 silver lining, however, is that Tomita plans to lead by example: the endowment will serve as a proof of concept for every university in Japan to learn from and ultimately follow, in turn expanding the broader LP landscape. “From a longer-term perspective, I want to work with and educate younger staff, and then I believe LP talent will increase more,” he notes. You can read the full interview here.

Token a big leap forward
We’ve written a fair amount recently about tokenisation and its role to play in the democratisation of PE. If you need a refresher about what exactly tokenisation is, check out this Side Letter from last month and PEI‘s  introductory guide from October. Adoption of this nascent technology looks set to be further catalysed by a new offering from Singapore’s ADDX, one of the frontrunners in this space, unveiled last week.

Unlike the platform’s traditional direct-to-consumer offering, ADDX Advantage will enable wealth managers to offer their clients access to tokenised private markets investments by either executing trades and fund transfers on behalf of end-investors, or create sub-accounts in their end-clients’ names, per a statement. Early partners include digital wealth manager StashAway (find our recent profile of that firm here) and multi-family office Raffles. The move is significant for ADDX’s tokenisation model, which until now required wealth managers to group client capital into one account, complicating the reporting process.

“You have seen people like StashAway starting to build a different sort of clientele segmentation, and for their higher-end clients, they’re looking for private market solutions,” ADDX chief executive Oi-Yee Choo tells Side Letter. “So, we become part of that solution because we do have now a very prolific product range and we have really good managers on board – stuff that you would recommend to your clients… It’s really pooling all of that into a functionality for the more B2B2C user… to develop their own advice for their clients using products on our platform.”

Everaars at the EIF
Frank Everaars, a former PE portfolio manager at Dutch asset manager Achmea Investment Management, has joined the European Investment Fund, according to a LinkedIn post. Everaars spent almost seven years at Achmea, which manages more than €200 billion on behalf of its pension fund clients. He has been appointed as an investment manager in EIF’s lower-mid market team, which backs growth, expansion and mid-market funds managed either by first-time teams, emerging managers or more established managers, per its website.

Essentials

Coasting closer to net zero
UK public pension Border to Coast has earmarked £4 billion ($5.2 billion; €4.8 billion) for PE, infrastructure and private debt, per a statement. Included in that hefty sum is a dedicated £1.35 billion ‘climate opportunities’ bucket, designed to support the transition to a low-carbon economy by investing across the likes of clean energy, transport and carbon sequestration.

“We felt there was appetite from our investors for a standalone fund that could go further in terms of looking at new technologies and smaller, more niche strategies that wouldn’t necessarily have formed part of the main [private markets] strategy,” head of internal management Mark Lyon tells affiliate title New Private Markets (registration required). The additional £4 billion will bring the value of Border to Coast’s private markets programme to almost £10 billion.

Ares’ retail pushIn July, Ares Management’s chief executive Michael Arougheti said the firm was actively considering how to deliver secondaries products into retail channels; it now appears to have solved this riddle. The firm last week launched its Ares Private Markets Fund, a 40 Act vehicle that will invest in a portfolio of private assets acquired principally on a secondary basis, affiliate title Secondaries Investor reported (registration required). With an initial $250 million in capital, the fund will be targeted at US high-net-worth individuals via registered investment advisers and financial advisers. The Landmark Partners team, which Ares acquired in April last year, will manage the vehicle.

As PEI noted in February, industry professionals are feverishly searching for the best ways to tap the world’s vast, and expanding, private wealth market. A secondaries portfolio offering diversification by vintage and sector, and the potential for quick money back, could be the ideal low-risk, steady-return solution. Advisers, however, will have to prove that the net return makes the double layer of fees associated with secondaries funds worth paying.

Dig Deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

11 April

12 April

13 April

14 April


Today’s letter was prepared by Alex Lynn with Rod JamesCarmela Mendoza and Helen de Beer