With global private equity investors principally focused on China, Scott Voss, managing director of HarbourVest Parners, argues that now is the time for long-term players to target undervalued assets in Japan.
"China is a growth story and that means high prices are being paid and there is arguably more volatility that could happen," Voss tells AVCJ TV. "In Japan we believe there is a buying opportunity and it's a contrarian view. Good companies can be bought at low prices, and that's an important part of our portfolio construction strategy."
Japan's strengths are manifested in its relative predictability compared to younger markets in the region. The economy is large and well established, business practices can be trusted, and private equity is known quantity from venture capital to buyouts to secondary transactions. The disadvantages, as Voss seems them, are common to many markets: limited liquidity doesn't facilitate exits and extending the holding period for an asset can damage returns.
But he stresses that these risks should not dissuade investors who are in for the long haul. "As institutional investors it's important to be long-term, to invest through cycles and not be influenced by the psychology of the markets around you," Voss adds. "My advice to institutional investors around the world who pull back when they should be piling in is to maintain a very disciplined time diversification asset allocation strategy."
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Join us at the 11th Annual AVCJ Private Equity & Venture Australia and New Zealand Forum on 5-7 March at the Four Seasons Hotel in Sydney to find out how funds of varying size are raising capital, sourcing deals and exits, as well as all you need to know to effectively navigate Australasia's changing alternative asset landscape.
After a decade-long mining boom the economy is experiencing a loss of momentum and the resulting deal flow reduction and lack of value in the market means GPs are chasing many of the same acquisition targets. That said, the exit market is recovering with both IPOs and M&A activity picking up, and an increase in LPs appetite for the asset class, and the recent government change means that the industry is cautiously optimistic for the future and expecting a rise in activity over the next 12 months.
5-7 March 2014, Four Seasons Hotel, Sydney