AVCJ

Japan's J-Star closes fourth fund at $443m

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Japanese private equity firm J-Star has closed its fourth middle-market fund at the hard cap of JPY48.5 billion ($433 million), up from JPY32.5 billion in the previous vintage.

J-Star No. 4 launched in April with a target of JPY42.5 billion and received commitments from funds-of-funds, asset managers, pension plans, banks, endowments, and family offices. About 60% of the capital was expected to come from international investors, which would be in line with the firm's second and third funds. AVCJ understands that a number of investors from J-Star No. 3 have returned for the latest vintage.

The new fund will continue the strategy of its predecessors, taking control or co-control stakes in domestic lower middle market companies across a range of sectors. This includes a strong focus on value-add, platform-based segment consolidations, and leveraging various consumption and industrial themes in Japan's demographics-driven macro environment. Check sizes typically fall in a range of JPY1-3 billion.

J-Star No. 1 and No. 2 raised JPY 12 billion in 2006 and JPY20.4 billion in 2013, respectively. The firm had about $400 million in assets under management (AUM) as of October, with an investment team of 16 professionals and an operations team of three. It plans to hire about eight more professionals in the next four years.

"For us, performance is everything, not size. I don't know how you can be successful just by accumulating AUM," J-Star CEO Greg Hara told AVCJ earlier this year. "Every time we raise a fund, it's linked to team building activities because we spend about 3-6 months discussing how we can maintain discipline in our strategy with a larger fund. If we can build a larger team with decent quality, then we will be more comfortable increasing the fund size."

Hara co-founded J-Star in 2006 alongside Kenichi Harada, Hideaki Sakurai, and Tatsuya Yumoto, as a spinout of the small-cap buyout program at Japanese VC firm Jafco. The GP invests in various light industrial and consumer sectors, with an increasing focus on service-oriented categories. Activity in recent months includes an exit from automotive industry supplier Tokai Trim and the creation of a media sector platform.

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