Longreach makes long-awaited first close

The initial $125 million of commitments was made by existing investors from Longreach's first fund, including US foundations and endowment investors. Longreach Capital Partners 2 is now working toward a final close of $750 million, equivalent to Longreach Capital Partners 1 launched in 2006. The sophomore fund will follow the same investment strategy employed in the debut vehicle, targeting Japanese companies as well as companies in Greater China, largely in the industrial, technology, financial services, business services and consumer sectors.

The fundraising comes during a period that was classified as difficult even before a 9.0-magnitude earthquake rocked the market. Yet, in the days after the quake, when Longreach announced its close, the fund's institutional investors voiced their commitment to Longreach. Mark Chiba, Longreach Group Chairman and Partner, added to AVCJ that although "the environment for fundraising in Japan's private equity industry is obviously tougher than about five to six years ago," the difficulties in fundraising are not limited to Japan alone given the global climate.

"Japan is really a place for control buyout investments, which drive genuine alpha returns by privileged sourcing and adding corporate and operational value, with the added upside potential of growth into China and Asia," Chiba continued.

Additionally, when Longreach returns to Japan with its second fund, it will have the advantage of experience under its belt. Longreach's first fund engaged in several strategic deals that did not involve auctions, with its acquisition of Sanyo Logistics among its cornerstone transactions.

While Japan-focused firms have encountered a harsh fundraising environment in recent years - with the market experiencing a 35.5% drop in capital raised in 2010, according to AVCJ data - it is likely that the recent natural disaster will draw attention to the market and help to whet the shrinking appetites of global investors. Chiba and his team acknowledge that the past performance of some local private equity funds have disappointed global LPs, but attribute these occurrences to specific overvalued and overleveraged deals and poor management performance, not to Japan macro factors.

While Chiba noted that Japan's economy will certainly be negatively affected in first half of 2011 due to the disaster, the market has already exhibited its resilience and will continue to thrive. "I think that we will see a very solid economic rebound in 2012 as Japan rebuilds in the broadest sense," he said. "It is important that we all stay committed, especially when so many foreign GPs have in fact given up on, exited or overlooked Japan."

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• Topics
• North Asia
• Fundraising
• The Longreach Group Limited
• Mark Chiba