About Brightrust

Brightrust PE Japan Co., Ltd. is a Tokyo-based private equity firm offering.investment advisory and fund management services to investors seeking investment opportunities in Japan.

Established in 2007, Brightrust offers fund research, due diligence, portfolio construction, post–investment monitoring and fund of funds management to its clients.

As an independent organization, Brightrust is free from conflict of interest and is uniquely positioned to provide unbiased opinions on Japan-focused private equity funds to investors. In addition, Brightrust is arguably the only Japanese advisor, dedicated to catering to the needs of international investors.

About the Japanese buyout market

International perception of Japanese private equity as a large cap buyout market is largely misguided. Although international media coverage has tended to focus only on the market’s few large deals, a breakdown of the market data collected by Brightrust since inception shows that. three-quarters of Japanese buyouts fall below JPY 10 billion (US$125 million) in transaction value. In fact Only 1 out of 30 deals exceeds JPY 100 billion.

The misclassification of Japan as a large cap market has resulted in disappointing returns for some international investors over the years. However, at the smaller end of the deal spectrum, Japan’s buyout market represents a very attractive investment opportunity. In the past decade, about 600 buyout deals have been executed by Japan-focused private equity funds and around 300 of these have been exited. Brightrust data shows an average 2.5x multiple and 45% IRR (gross) per deal.

To capture the opportunity, we strongly recommend investors to focus on private equity firms in the small to mid cap sector. Currently, there are approximately 85 buyout general partners (GPs) active in Japan, of which around 55 focus solely on Japan and manage third party money. Many local GPs are investing from their second, third and forth funds and almost all focus on SME buyouts/turnarounds. In the past, these local GPs have typically raised funds only from Japanese investors and therefore, very few are known to the international investor community.

Japan’s small to mid cap sector offers the following attractive characteristics to investors:
- An abundance of under-managed SMEs with world-class products/services
- Attractive valuations
- Less price-sensitive competition with more weight on non-pricing factors
Investing in Japanese SMEs is also an alternative route to capturinge Asian growth.

Optimizing the opportunity 

To maximize the returns opportunity presented by Japan’s small to mid cap space, investors need to build a portfolio with good diversification within the target sector. Balance should be sought between: vintages; buyout and turnaround funds; micro, small, and mid cap plays; cyclical and non-cyclical opportunities; export- and domestic-oriented companies; and equity, mezzanine, and debt funds.

At Brightrust, we pay particular attention to a portfolio’s sensitivity to market cycle. Given the industrial focus of Japan, without a very conscious effort you could easily end up with a highly cyclical portfolio, which is the major cause of volatility in returns.

Choosing the right local partner

At Brightrust, our mission is to navigate international investors through Japan’s local private equity markets, enabling clients to capitalize on the returns potential without bearing unnecessary risk. Let us be your best partner.