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Advantage Partners raising $2bn ‘hedge fund’

Advantage Partners, one of Japan’s most prominent local private equity groups, is making its first foray into what one investor referred to as ‘hedge fund management’, with a $2 billion fund that will buy minority stakes in listed Japanese companies.

Advantage Partners, a Japan-focused buyout firm formed by former Bain consultants, is looking to raise a $2 billion (€1.5 billion) hedge fund to invest in Japanese stocks, according to investors.

“I have heard they will raise a new fund that will invest in listed equities,” a Tokyo-based investor told PEO. A second source confirmed that Advantage had communicated to its limited partners a plan to establish a 10-person team that would be focused on investing in Japanese stocks. The new fund, he said, would allow Advantage to take minority stakes in listed companies.

Both investors told PEO that they had reservations about Advantage Partners’ expansion into the listed equity space. “Personally, I would prefer they focus on their original buyout business,” said one. He added that he will not be interested in investing in the new fund.

However, he is sympathetic to the motivation behind this foray into the listed equity market. “The environment (in Japan) is becoming tougher for pure private equity plays,” he said.

Advantage Partners, hailed one of the “big three” local independent private equity firms in Japan, raised $1.9 billion for a fourth buyout fund earlier this year. Despite the fundraising success, the group earned criticism from local investors who were not able to allocate as much capital as they had hoped to the fund.
 
The investor said Advantage has only made one investment from its latest fund, in Tokyo Star Bank, and has been struggling to complete the transaction, in part because of the recent credit crunch. The transaction is reported to be worth more than $2.5 billion.
 
Advantage Partners declined to comment.