Fund Interest Investments
As low interest rates have become the norm and returns from traditional investment methods decrease, alternative investments such as venture capital, buyout funds and hedge funds have expanded even in Japan. However, investments in these kinds of funds generally require a commitment of about 10 years, and in principle, it is not possible to pull out during that time.
However, significant fluctuation in the performance of institutional investors and company pensions has accompanied that of the financial market of late, and there is demand for transferring invested capital into other investment methods. Demand is also on the rise for liquidation in order to respond to tightening of financial institution regulations and changes in pension plans. Due to these circumstances, the secondary market for equity funds which is already enormous overseas is also expanding in Japan.
Ant Capital Partners formed Japan’s first full-fledged secondary fund and has managed a cumulative total of ¥50 billion in investment funds for more than 10 years. As the only secondary fund manager in Japan, we have a proven track record of transactions with many general and limited partnerships, financial institutions and advisors and can handle all kinds of liquidation needs of domestic and overseas fund investors.
- Example Fund Investments
Tightening of financial institution regulations
- Reduction of risky assets through application of Basel banking regulations, the Volcker Rule, etc.
- Reduction of risky assets through insurance company solvency regulations
Mergers and reorganizations of financial institutions
- Adjustment of fund investment position through mergers or reorganizations
Changing of existing investor portfolios
- Adjustment of investment fund position through rebalancing of portfolio
- Adjustment of specific vintages, sectors, etc. within investment funds
- Disposition from standpoint of reducing business costs associated with tail-end investment funds
Changes to pension plan
- Selling of portfolios beginning with assets decreasing as a result of plan changes
Liquidation of global PE fund investment holdings (domestic institutional investor)
Investments were made in global PE funds in the latter half of the 2000s when PE investments were popular, but a strong J-curve effect is suppressing dividends. This year’s numbers are expected to be in the black, so the hope is to take the opportunity to liquidate the investment holdings.
- The seller is a domestic institutional investor. Since the latter half of the 2000s, it had invested in several global PE funds through a fund of funds, but dividends were not paid as expected due to a strong J-curve effect.
- A report is issued quarterly on the status of the funds, but it is complex and all in English. The person who was in charge at the time the investments were made has already moved to a different department, and it is a struggle to even manage profit and loss.
- The full-year business results are better than normal this year, so the hope is to take this opportunity to liquidate the investment holdings.
- Ant Capital Partners has experience with and a track record of investing in many domestic and overseas PE funds and was able to provide an appealing price. We also conducted negotiations with an intermediary of the fund of funds and purchased the investment holdings in a timely fashion.
General partnership restructuring (domestic venture fund)
An investor whose internal rules make it difficult to extend a partnership agreement beyond its stipulation will not extend a partnership. At the same time, expectations are increasing with respect to an IPO of the main portfolio, and the venture capital fund manager, who is the general partner, hopes to maximize returns.
- The venture capital fund was established prior to the economic downturn precipitated by the Lehman Brothers bankruptcy, and growth of the portfolio was somewhat delayed, but expectations were increasing with respect to an IPO of the main stock before the fund matured, so the investors were discussing another extension of the agreement.
- Particularly among investors looking to liquidate, there were those whose internal rules would not allow another extension, so they insisted upon liquidation of the fund, which created a major problem for the venture capital fund.
- Ant Capital Partners has an extensive track record with such transactions and through discussions with the general partner of the fund was able to propose a solution adjusting stakeholder interests. As a result, Ant Capital Partners took over the fund holdings of investors that were unable to agree to re-extend the agreement and was also able to provide sufficient time for future fund management by modifying the fund’s partnership agreement.
Bulk trading (domestic business company)
A certain company wants to liquidate fund holdings that other secondary funds are unable to consider. Moreover, there are multiple holdings, and they want to do a bulk trade before the end of the fiscal year one month later.
- The seller, a business company, had invested in various funds and held several for which it had already secured returns and hoped to liquidate them due to the investments losing their meaning and the increasing burden of monitoring them.
- As these were overseas venture funds, growth funds in emerging markets and the like, there was very limited information on the stocks. On top of that, the transaction would be complicated due to the requirement of investor registration in the countries where the investments were located.
- The balance of the fund holdings was also small, so other secondary funds had turned down the transaction, making the fund holdings extremely illiquid.
- Ant Capital Partners proposed a bulk transfer of multiple fund holdings based on our policy of providing solutions no matter how small or illiquid the investment. We also completed everything from due diligence to signing of the transfer agreement within the short one-month time frame and were able to satisfy the needs of the seller.