The recently retired expert Hiroshi Nakamura, former Managing Director from Oaktree Japan shares his professional opinion about the current investment opportunities in the Japan market. With over 20 years of experiences in the Real Estate market both in US and Japan, Mr. Nakamura believes “NOW it’s the perfect timing to invest in Japan Alternative Market”
After 20 years, Japan’s economy is finally changing. We see changes in the stocks, currency, and Bond. However, because Japanese are conservative investors, how can they take part in such opportunity? What can foreigners do to attract Japanese investors? How can foreigners get into the Japan market? Mr. Nakamura is here to guide us into the market.
Expert Profile
Mr. Nakamura joined Oaktree in 2007 Prior to that, he spent eight years at Strategic Value Partners Japan, LLC and its affiliate, Moore Strategic Value Partners, most recently as President and Partner. Prior to that, he spent two years as the head of the Securitization group at Morgan Stanley, Japan. Before that, Mr. Nakamura spent seven years as a Director in the Real Estate Investment Banking group at Merrill Lynch & Co., where he served as a relationship manager for Japanese real estate corporations. Prior experience includes work at Bankers Trust New York and the Bank of Tokyo. Mr. Nakamura has more than 20 years experiences in Real Estate. He received a B.A. degree in International Relations from Tokyo University. He is fluent in English and Japanese.
- How can foreign investors market themselves to attract Japanese Investors?
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In order to attract foreign investors, three things are needed and they are
1. Big capital
2. Big names
3. Long track records Japanese investors are conservative; therefore big names, capital and track records are key features that will attract them. They often invest fund asset in big Japanese banks such as Mitsubishi than invest through a small less known asset management company, even when smaller companies have better investment records. Why? Because when markets are down, and even the largest bank in Japan is losing money, Japanese fund managers can just blame on the market instead of poor investment performance. It’s easier to say “its okay even big banks like Mitsubishi is losing money, we are not doing too bad” Many well-performed foreign asset management companies are having a hard time fund raising in Japan due to their short track records. Therefore, long stable track records are more important than short term good performance data to Japanese.
- What is the correct procedure to raise fund in Japan?
- Due to many limitation on the Japanese law, majority high tax related problems, on companies in Japan, its better to set up a security company 1st. Allow 2-3 years of good relationship building with Japanese trust and good Japanese fund managers. If you have a company in HK, visa limitation might strain you from continuing good relationship building with the Japanese fund managers.
- Why is it a good time to raise fund in Japan?
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With the current Japanese Pension performance, Japanese has to look into alternative investments for more return. Investing in Japan is stable because Japan’s market is well developed. Business is safe in Japan for its equal legal system, protective investment rights, and foreign investors can buy anything in Japan, no depreciation etc. However, due to the same reason, return in such well-developed market requires long term investments, which is why investing in Japan is not appealing to foreign investors, especially opportunistic firms. Investors would need to buy at a high price and sell at a high price or buy at a good time with deflation but everything goes down every day.
In this well-developed market, Japanese people have a lot of money on their hands to invest (outbound). With current fund performance in Japan, Japanese are seeking for foreign fund managers to help them manage their money in. The only barrier is the culture difference, which is why I recommend either take your time to research Japan market/culture first, or find a placement agency to consult. Japan is still a good place to invest your money compare to China or Malaysia. There is a clear accountable legal system. Also, like I mentioned before Japan market is volatile right now compare to before or for the past 20 years.
Stability is one of the key competitive edges that Japanese Market presents to investors in the global market. Its conservativeness and culture oriented market are often viewed as both blessing and damnation. Foreign investors should overlook the initial relation building stage in order to achieve long stable investment returns.
- What is your favorite Alternative Asset Class? Why?
- Real estate investment has always been my favorite alternative asset class because you can simply see what you are investing in. I really like real estate investment and I even quit my stable position at a respectable company for that when they put me in operation instead of investment department in real estate.
- Do you think current Real Estate Investment is coming back in Japan?
- It is too early to invest in the long term; however, it is a right timing to trade in real-estate, stocks, bond for next 2 years due to the volatility of the market