TOKYO -- Mitsubishi Corp. is setting up an infrastructure fund to manage up to 100 billion yen ($890 million) in assets, focusing on such public facilities as airports and roads in Japan.
The fund will be established as early as this month by a wholly owned subsidiary of the general trading house. Mizuho Bank, pension funds and the Private Finance Initiative Promotion Corp. of Japan will invest in the fund, with more investors to be solicited through March 2019. The fund may eventually go public.
The investment targets will be assets likely to offer solid returns supported by stable fee income. As the national and local governments increasingly unload public facilities or their management rights to lighten up their fiscal burdens, the fund would funnel investor money into developing such infrastructure.
The plan is to purchase shares initially in operators of power plants, port facilities and communication infrastructure spun off by nonfinancial companies. The fund will also invest in operators of airports, water supply and treatment systems and roads owned by the national and local governments. It also is expected to capture funding demand for updating aged infrastructure.
The Sumitomo Mitsui Trust Research Institute estimates the Japanese market for infrastructure funds at nearly 200 billion yen. A big chunk of the market invests in renewable energy sources like solar power. Mitsubishi's new fund will be the first major one in Japan to focus mainly on public facility managers.
The Mitsubishi group already operates power plants and transportation infrastructure. The company will capitalize on that know-how and focus its assets on investment targets that enhance efficiency and boost returns. The fund is expected to generate an annual yield in the single-percentage-point range, emerging as an attractive investment vehicle amid ultra-low interest rates in Japan.
A 2011 revision of the private finance initiative law has opened avenues for private-sector money to go to development of government capital, spurring the transfer of management rights of such facilities to the private sector.