Japan’s Nomura Holdings plans 50 billion yen private equity fund

Tokyo: Japan’s largest securities company, Nomura Holdings Inc., plans to raise as much as 50 billion yen (nearly Rs2,000 crore) to invest in private equity (PE) funds focused on the Asia-Pacific region.

Nomura’s PE advisory unit is meeting with 20 funds in China, 20 in India, 20 in Australia and New Zealand, and 30 in Japan, said Junichi Ebata, president of Private Equity Funds Research and Investments Co. (Pefri). Nomura owns 65% of the unit, which was set up in October 2007.

“Investor demand for private equity investments is increasing rapidly,” Ebata, 54, said in an 11 April interview. “The US subprime crisis has created uncertainty over traditional assets, and investors are looking for alternatives.”

Buyouts announced in Asia this year have jumped 60% to about $16 billion from the same period in 2007, according to data compiled by Bloomberg. The subprime mortgage meltdown has sent investors fleeing from public markets, creating an opportunity for PE funds to raise capital, Ebata added.

“It’s a juicy business for Nomura,” said Yasuo Sugeno, an analyst in the corporate financial strategic department at Daiwa Institute of Research Ltd in Tokyo. “The business will bring commissions and also investment banking mandates such as advising and underwriting initial public offerings,” he added.

Nomura’s timeline

Nomura’s Pefri unit will make selections for the ¥30-50 billion fund of funds by June and will start operating it in October, Ebata said. Fund of funds line up investors and then farm out the money to a variety of managers.

Nomura’s new chief executive officer Kenichi Watanabe, 55, said last month that he aims to expand in Europe and Asia and will “take risks” to compete with Wall Street banks even after his firm lost $1.5 billion on US subprime-linked investments.

Nomura, Norinchukin Bank Ltd and Development Bank of Japan formed Pefri to advise professional investors on PE investments. The unit aims to tap investors in Japan, Singapore, Hong Kong, Taiwan and South Korea, including pension funds, banks, life insurers, regional banks and wealthy individuals, Ebata said.

The unit aims for a 15-20% internal rate of return and will include funds that invest in public infrastructure and retail companies in India, he said. It is also meeting 10 PE firms in South-East Asia, five in Taiwan and 10 in South Korea.

“Nomura may need to offer higher returns if they want to deal with overseas investors, who normally seek 40% internal rates of return for private equity investments in emerging markets,” Sugeno said.

Pefri plans to set up another ¥50 billion fund of funds in March 2009, targeting PE funds in Europe and the US, Ebata said.

feedback@livemint.com