Japan LPs give mixed views on co-investment - AVCJ Forum

Kazushige Kobayashi, managing director with Capital Dynamics, told the AVCJ Japan Forum that poor performance following the global financial crisis meant that LPs were under more pressure to do co-investment but picking the right opportunities is still a challenge for some Japanese investors

"If you co-invest, management fees may come down but the overall fund cost will not always be drastically reduced," he said. "Co-investment is not easy and you need to find good GPs that are used to doing it. You need to be selective of deals and additional due diligence is necessary - but time can be limited."

On the other hand, Kobayashi emphasized the importance of a diversified and balanced portfolio, adding that co-investment could still be a useful tool for LPs looking to increase exposure to particular sectors.

Soichi Sam Takata, head of private equity, Tokio Marine Asset Management, said he remained quite skeptical of co-investment. Through this own research Takata found that only a few co-investment programs have actually outperformed their associated fund programs.

"The hit rate is not very high and so you have to have a very analytical eye and you have to control the deal flow in order to get a high return," he said.

Takata added that when one looks at a single fund, it is often the largest deal that has the lowest performance within the fund. While this is a global phenomenom, he said the trend is most conspicuous in Japan.

Toru Masuda, head of private equity at Sumitomo Mitsui Trust Bank, said good co-investment opportunities could be found in larger deals but repeated Kobayashi's view on the important of due diliegeance.

'In Japan you might want to hear the proposal early, from the initial bidding, as you will want to be a part of the deal to better understand the content," he said. "But ultimately the deal may fail so you still have to be prepared for some loss."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• LPs
• North Asia
• Co-investment
• LPs
• Japan
• AVCJ Events