Northleaf launches Tokyo office, targets Asian LPs

The firm, which has just over USD 20bn in assets under management (AUM), entered the Australian market in 2015, first recruiting local talent and then launching in Melbourne in 2018. These were primarily investment-driven moves made with a view to strengthening infrastructure coverage.

More recently, Northleaf has ramped up its fundraising efforts in Asia, securing LP commitments from investors in Japan, Korea, and Taiwan. Jeff Pentland, a founding partner at the firm who previously worked as a lawyer in Japan in the 1990s, has relocated to Tokyo to “plant a flag in as broad a way as possible.”

“We’ve established good relationships with several Japanese investors. The Tokyo office makes sense partly because of that, partly because of my experience in Japan in the past. Japan is also a sophisticated financial market where LPs are increasingly coming into private markets, and Tokyo is well-connected to the rest of North Asia, so it’s a good centre from which to work,” he said.

“I expect we will seek to open another office in the region over the coming months and that would likely be in Seoul.”

Northleaf used to be part of TD Bank Group and spun out in 2009. The firm’s LP base is largely Canadian, and diversification has been a strategic imperative for several years. This led to the expansion of client servicing capabilities in the UK and the US. Asia accounts for a very small portion of capital raised – a single-digit percentage – but the structural trends were clear.

“When you look at the capital flows that are expected to come into private markets over the next number of years, there will be a big increase out of Asia Pacific,” Pentland added. “We’ve been looking at establishing a presence here for a while – I’ve been going back and forth for the last decade – but then the pandemic hit, which threw a monkey wrench into many things.”

Northleaf follows a deliberate middle-market strategy, concentrated on North America and Western Europe. It is predicated on the notion that institutional investors often build out their private markets programmes by focusing on large-cap managers and then seek diversification by increasing middle-market exposure.

The firm started out in private equity as a fund-of-funds investor and now offers primary co-mingled, secondary, and direct strategies. Private equity accounts for about half of AUM and there have been a small number of commitments to managers in Japan, China, India, and Australia.

Infrastructure and private credit were introduced in 2010 and 2016, respectively, and each now has about USD 5bn in AUM. Both are direct programmes. Credit investments primarily focus on financial sponsor-backed companies, while the infrastructure team targets OECD member nations, including Australia and New Zealand.

Pentland noted that Northleaf is seeing increased investor appetite for credit and infrastructure, adding that investors with capital allocations available recognise that the best vintages are often those characterised by volatility, dislocation, and scarcity of capital.

“People are looking for strategies that can generate cash yield right now. In the case of private credit, if you’re investing in solid companies backed by financial sponsors with domain expertise in floating rate loans, that’s an attractive place to be in a rising interest rate environment,” he said.

“Infrastructure has proven itself to be a useful component of people’s portfolios through the pandemic and into an inflationary period. If you have assets with strong contracted revenue frameworks – assets that can pass through inflation and are appropriately levered – that is also attractive.”

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• Topics
• GPs
• LPs
• North Asia
• Fundraising
• People
• Japan
• South Korea
• Northleaf Capital Partners
• Asia
• Appointments