Taiki 3724

Here’s Why Private Debt Fund Would Best Fit for Japanese HNWIs

Not to mention interest rates have remained near-zero, Japanese households have not been able to grow their assets so much. While US household assets have grown by 3.41 times between 1997 and 2019, Japanese have only grown by 1.48 times during the same period. And still, more than half of $18 trillion household assets are still held as cash.

I think one of the main reasons is lack of good investment opportunities for Japanese individuals.

There have certainly been demands for investment opportunities. What has been notably sold to individual investors is the group of mutual funds to pay monthly dividends. Monthly income funds were so popular for Japanese individual investors seeking stable income. It accounted over half of AUM of total mutual funds in Japan.
However, although those funds typically hold higher yielding assets such as HY bonds or US REITs, most of the funds had sold assets to pay dividends. FSA expressed a sense of caution for those funds in 2017, and they have become less popular now.

Recently, “Social Lending”, a platform to tie borrowers and individual investors appeared to be quite popular. In February, for a real estate debt deal by a major social lending platform, the hard cap of 360million yen was sold for less than two and half minutes. Most of the social lending deals seem to be sold instantly. This also shows that Japanese individual investors really prefer income generating investments.

However, should the underlying assets to generate income be always HY bonds, US REITs, or some construction loans? It is true that Japan is overbanked, and therefore, there is not much high yielding debt available for investors. Then how about overseas private debts? Especially if some experts underwrite risks and choose the best ones.

Private debt fund itself is hardly known by Japanese individual investors, as it is relatively new and not offered to them yet. I believe high quality international private debt funds should best fit for Japanese individual investors.