The private equity talent contest

Private equity is becoming a more attractive prospect for young professionals in Japan, but firms need to stand out to attract talent.

Global private equity firms looking to enter or scale up their operations in Japan face a tough market when it comes to attracting talent, due to the small pool of professionals with the necessary skills and experience.

With private equity growing but still a relatively young industry, there is a shortage of experienced dealmakers and operations professionals with the requisite Japanese language and cultural understanding.

Sakuya Tajima, head of business development in Japan at Sanne Group, says: “Unless you have an established local office, it will be difficult to hire someone suitable with the relevant experience and skills. There are a lot of Japanese speakers advertising their skills as agents, but most lack a good understanding of private equity and so will struggle to make meaningful introductions.

“On the other hand, it is even more challenging to find private equity professionals with adequate English skills to join a global firm, given that local private equity business has been conducted in Japanese for many years.”

Notable hires by international firms include EQT’s appointment of Japan Post Investment managing director Tetsuro Onitsuka as head of private equity Japan last year. Apollo hired a managing director from Bain Capital, Tetsuji Okamoto, to lead its PE business in Japan in 2019, and KKR brought in Hidekazu Harada, a senior banker from Bank of America Merrill Lynch, as an MD in Tokyo in 2020.

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Peter Matsumoto, a principal in Korn Ferry’s global financial markets practice based in Tokyo, says: “Recruiting for private equity in Japan has always been difficult. If you are a strong global brand that has been successful elsewhere and is starting investment activities in Japan, that can be an attractive opportunity for anybody looking to join a team at the early stage of its growth. I would say the strength of brand is important in any market but especially so in Japan.”

The perception of PE firms as corporate raiders has changed in the past 20 years, and the industry is becoming more attractive to younger generations.

Tajima says: “On the bright side, the increasing salaries on offer are clearly driving more graduates to consider private equity over careers in big companies or large financial institutions. There is a growing interest in both private equity and venture capital at the junior level, which is good news for the expansion of the talent pool in the longer term.”

The hardest roles to fill are for mid-level vice-presidents and directors, where firms are looking to hire individuals with PE experience. Such professionals, who may be leaving investment banks and consulting firms, have a lot of options.

“There is a lot of competition to hire people with that level of experience and skillset,” says Matsumoto. “Venture capital is growing in Japan, so that is an attractive option for people, and the start-up scene is also strong. If you are a banker, you could join a growing company that is planning to IPO as a chief financial officer or chief strategy officer, which means private equity is not necessarily the first option.”

Meanwhile, PE firms are expanding their footprints into other asset classes in Japan, fuelling the war for talent and driving up salaries. “Firms have to stand out for their culture,” says Matsumoto. “The private equity business is tough, so standing out as a progressive and flexible employer is important when it comes to attracting talent.”