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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These are important times for the private equity industry. General partners are becoming a more important and influential force in the global markets. With the diversification into other classes of the alternative space, private equity firms are cornering the market for private market investing by offering companies customized solutions for their financing needs. Traditional private equity firms have also upped their game with a renewed focus on operational value-add. Also back on the top are venture capitalists as they fuel the skyrocketing of the technology company valuations. Meanwhile, the Limited Partners community is also evolving with many positioning themselves as co-investment partners and branching out into direct investments while others continue to play the passive traditional LP role.
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