Japan’s Orix to launch buyout fund in asset management pivot, CEO says

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TOKYO — Japanese finance group Orix will expand its asset management business with a private equity fund, seeing limited earnings growth ahead for its leasing and banking segments even with interest rates expected to go up.

“If interest rates rise only 1 percentage point or so, it’s hard to expect high returns,” President and CEO Makoto Inoue told Nikkei.

The company plans to launch a buyout fund in 2024, raising around $1 billion to $2 billion from investors, with Orix contributing as well.

“We’ve had people say they want to put their money with Orix in recognition of our investment performance,” Inoue said.

Orix has self-funded investments in the past. It has provided capital and business support to target companies to raise their value and before listing them on the stock market or selling them to another buyer.

In March 2022, Orix sold accounting software developer Yayoi to U.S. private equity firm KKR for roughly triple what it had paid in 2014. Orix acquired Japanese cosmetics and health food company DHC for around 300 billion yen ($2 billion at current rates) in 2023 and said the same year that it would put a total of around 200 billion yen into Toshiba in a combination of equity investment and mezzanine financing.

But self-funded investments add to Orix’s risk assets and could hurt its credit rating. By creating a buyout fund that taps outside money, it will be able to acquire companies without adding to its own assets.

Fees from managing the fund could also become a stable source of income.

Orix’s asset management business includes real estate investment trusts in Japan and Dutch asset manager Robeco, which was acquired in 2013.

The group’s domestic and overseas assets under management totaled 60 trillion yen as of the end of September.

“In the future, we want to grow our assets under management to around 200 trillion yen, on par with world-leading managers in the U.S. and Europe,” Inoue said.

Expectations are high that the Bank of Japan will end its negative interest rate policy in 2024. If interest rates rise, the yen is expected to appreciate.

“We are all for a strong yen,” Inoue said. “It will make it easier to invest overseas.”

He emphasized that with overseas accounting for more than 30% of its operating assets, the group’s future growth will be found abroad.

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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