Japanese private equity has emerged as a surprising leader in returns for KKR, according to co-chief executive Joseph Bae. Speaking at the Hong Kong Monetary Authority’s 2024 Global Financial Leaders’ Investment Summit on November 19, Bae emphasized that Japan has outperformed all other countries in KKR’s global private equity portfolio.
Bae attributed these impressive returns to several factors, including low valuations, affordable financing, and significant potential for operational improvements within Japanese companies. As a result, Japan has become one of the most attractive markets in the Asia-Pacific region, with a surge of domestic funds and global firms vying for investment opportunities.
Key Takeaways
KKR’s best private equity returns are currently in Japan.
Factors contributing to success include low valuations and operational improvement potential.
Japan is the only Asia-Pacific market to see an increase in deal value last year.
Japan's private equity landscape has been invigorated by various factors, including succession events in family-owned businesses, corporate restructurings, and opportunities arising from reforms in the Tokyo Stock Exchange. Ming Lu, KKR’s executive chairman for Asia-Pacific, highlighted these developments as significant opportunities for the firm.
KKR’s recent fund performance in Asia showcases the firm’s strong positioning:
Bae noted that if someone had predicted in 2024 that Japan would be the second-largest destination for KKR’s private equity and real estate investments outside of the U.S., it would have seemed improbable. However, the current landscape reflects this reality.
Scott Nuttall, KKR co-chief, echoed Bae’s sentiments, stating that Japan presents a “massive opportunity” for traditional buyouts. He emphasized that the market is particularly interesting for investors looking for growth.
In addition to targeting investment opportunities, KKR is also focusing on Japan’s high-net-worth individuals as a potential source of capital for its funds. Paula Campbell Roberts, managing director and chief investment strategist for global wealth, indicated that this demographic is becoming increasingly important for KKR’s strategy in the region.
With nearly $80 billion in assets under management in Asia, KKR remains optimistic about the region's growth potential. Bae expressed confidence in Asia's trajectory, suggesting that it could rival the U.S. market in private equity within the next 15 to 20 years, particularly when considering the growth prospects in China, India, and Japan.
As KKR continues to navigate the evolving landscape of private equity, its focus on Japan underscores the country’s significance as a key player in the global investment arena.
Sources
KKR’s Bae: ‘Our best returns are in Japanese PE', Private Equity International.