Carlyle crosses $600m threshold on Japan fund
The Carlyle Group has crossed the halfway mark on its third Japan buyout fund, with approximately $600 million raised predominantly from domestic investors.
The private equity firm is seeking around $1 billion for the vehicle, which was registered with US regulators last August. David Rubenstein, co-CEO of Carlyle, said in the company's third-quarter earnings call that they were now in the process of raising capital outside of Japan. He doesn't anticipate any problems reaching the target.
"The fund will be probably smaller than our last-generation Japan fund just because the interest in Japan has probably been less than it was when we raised the last one, though we still are, I think, the dominant private equity player in Japan. We've been there longer and have a longer track record," Rubenstein added.
Carlyle's previous Japan fund received commitments of JPY215 billion ($2.2 billion) in 2006, but the corpus was subsequently reduced to JPY165.6 billion. As of March 2014, the fund had delivered a net multiple of 0.9x and a negative IRR, according the California Public Employees' Retirement System (CalPERS).
The more mature Carlyle Japan Partners I - a 2001 vintage vehicle that closed in 2003 with a corpus of JPY50 billion - is exhibiting strong performance. As of March, the net multiple was 2.5x and the IRR was 34.2%. This is superior to Carlyle's 2000 vintage North America buyout fund, although the multiple trails that of Carlyle Asia Partners I, which launched in 1999.
The third Japan fund comes at a time when investor sentiment towards Japan is gradually changing. Fiscal and monetary reforms brought in by Prime Minister Shinzo Abe have made LPs more interested in the country, but lack of clarity over structural reforms and corporate governance concerns are still a barrier. As Rubenstein suggested, interest has yet to return to pre-global financial crisis levels.
Carlyle has already announced two investments from Fund III. It acquired a controlling stake in Oyatsu Company, a manufacturer of Baby-Star ramen snacks, in May and followed up with an agreement to buy Sunsho Pharmaceutical, a contract manufacturer in the health and nutrition industry, in June.
In July, the private equity firm also made a tender offer to acquire 100% of Japanese mortgage bank SBI Mortgage in deal valued at approximately JPY43.2 billion.
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