The firm established this month Nomura Capital Partners, a wholly-owned subsidiary that will oversee the firm’s principal investment business, according to a statement from the firm.
Nomura previously announced its intention to revive the business in November, in a move to respond to its clients’ “growing need for a wider range of solutions”. The bank plans to make an initial investment of ¥100bn ($903m) in the new business.
The private equity business will initially invest in small-to-medium enterprises in Japan, with the potential to expand to the rest of Asia in the future, according to a source familiar with the matter.
2008 pullback
Previously, the firm had a principal finance business (essentially private equity) through its wholly-owned subsidiary, Nomura Principal Finance (NPF), which was established in 2000.
In 2007, the firm also planned to expand its principal finance business into Asia after gaining experience in buyouts in Japan and venture capital investing in Europe, according to a statement at the time.
But Nomura eventually decided to discontinue any new investments from 2008 onward as a result of tighter financial regulations that followed the 2008 financial crisis, the industry source said. In 2014, NPF dissolved its operations.
The firm identified the opportunities that support the revival of its private equity business. In recent years, Japanese companies have become more open to accepting capital from private equity funds, the source said. In addition, there has been an increasing number of aging business owners who are looking at strategies for retirement and inheritance.
“The needs of the firm’s corporate clients have become increasingly diversified and sophisticated. In order to respond to these needs, the new company will primarily provide equity as a solution for business reorganisations and revitalisations, business succession as well as management buyouts,” the firm said in the statement.
The increasing demand for private equity is also seen in other markets in Asia. For example, alternative assets in Singapore grew 17% to S$478bn ($351bn) in 2016, driven by private equity and hedge funds, according to a report by the Monetary Authority of Singapore.
In China, assets in its private fund industry, which includes private equity funds, rose 28% over the first 10 months in 2017 to RMB 10.77trn ($1.68trn), according to data from the Asset Management Association of China.
Private equity generally provides investors with higher returns than traditional asset classes but demands a multi-year capital lockup period.
