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Finance

Blackstone zeroes in on Japan's affluent

US private equity group targets individuals unhappy with paltry returns

Blackstone Group will likely be the first large private equity group to target wealthy retail investors in Japan.   © Reuters

TOKYO -- Blackstone Group will start taking investments from wealthy Japanese individuals as soon as next year, with plans to raise billions of dollars in three to five years, as the U.S. private equity firm diversifies funding in the country.

This marks the first time a major investment fund offers products to retail investors in Japan. Blackstone has established a dedicated unit for the business at its Tokyo office earlier this spring. Financial products will be rolled out after clearing such issues as taxes and asset reporting.

After more than a decade in Japan, Blackstone looks to deepen its involvement in the market, diversifying its sources of fundraising. The company sees an opportunity among the moneyed class unhappy with low returns amid rock-bottom interest rates. 

Blackstone will select financial institutions, such as large brokerages with ties to the well-heeled, that will sell its products. Blackstone seeks to complete the necessary paperwork as early as 2021.

Alternative investment, a category that includes hedge funds, private equity and venture capital, normally require minimum contributions in the millions of dollars as well as commitments typically lasting a decade or so.

Most participants in these funds are institutional investors. Wealthy retail investors usually set up their own privately held family offices to invest in such funds.

But institutional investors are easily swayed by economic conditions and the regulatory climate. During the global financial crisis of 2008, institutional investors collectively yanked their assets, leaving funds depleted of capital.

"By diversifying their source of funding, funds can stabilize cash on hand and potentially improve asset management," said Shuji Hatsukaiwa of Schroder Investment Management.

To raise funds from retail investors, Blackstone created such vehicles as real estate investment trusts. Funding from individuals, mostly in the U.S., now makes up more than 10% of Blackstone's total asset pile.

Japan has more than 80,000 households with net financial assets of at least 500 million yen ($4.77 million), according to the Nomura Research Institute.

This demographic has grown increasingly unhappy with portfolios that have struggled with historically low yields. But Japan's affluent have only limited domestic investment alternatives with higher returns.

Blackstone could lean on its reputation as a globally recognized private equity group with a strong track record to draw an outpouring of funding from the wealthy.

Blackstone first opened its Tokyo office in 2007. The company acquired condominiums from General Electric's Japanese arm for about 200 billion yen in 2014.

This July, Blackstone decided to acquire four Japanese logistics centers from builder Daiwa House Industry. The company's total real estate investment in Japan exceeds an estimated 1 trillion yen.

In 2018, Blackstone set up a private equity unit at its Tokyo office. The multinational investment firm decided this August to purchase the consumer health business from Japan's Takeda Pharmaceutical in a deal valued at about 240 billion yen.

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