Japan’s $81bn endowment faces hiring ‘challenge’ as it targets fund commitments

Japan’s gargantuan new university endowment faces domestic hiring challenges as it pushes into alternative assets.

The ¥10 trillion ($80.7 billion; €74.3 billion) fund, which is managed by the Japan Science and Technology Agency, will initially rely on gatekeepers until it has enough internal resources to invest directly in private equity, Yasuyuki Tomita, who joined the fund as head of private equity investments last month, told affiliate publication Private Equity International. It is currently screening potential gatekeepers before issuing a formal request for proposals.

JST will gradually increase its allocation to direct fund commitments, Tomita added.

“Our team is only four people – it’s a quite small number,” he said. “In the near future, we want to do direct investments to funds; to achieve this, we will increase that number of staff. Even in the future, we have to utilize fund of funds in some of the strategies in which we do not have enough [resources] or expertise.”

Tomita joined the team after two decades at Development Bank of Japan, where he launched an asset management business in private equity and infrastructure. He reports to Tadasu Matsuo, a former co-head of HarbourVest’s Japan office, who joined the endowment fund as head of global alternative investment in January. They are accompanied by chief investment officer Masakazu Kita, a former manager at Norinchukin Bank, according to Bloomberg.

Kita told Bloomberg JST wants to boost its exposure to alternatives. “I can’t say a specific number, but alternative assets should be of a certain amount, it should have a sizable weighting,” he said.

Kita added that he wants the alternative investment team to include specialists investing directly in private equity, venture capital, real estate and infrastructure, Bloomberg reported.

Tomita said finding talent has been challenging. “Experienced people are running out in the Japanese PE market, so I want to hire more, but I feel this is quite a challenge,” Tomita said. “The number of LP professionals is very limited in Japan. I have nearly 20 years’ experience in [private investments], but that’s quite rare.”

University endowments have pedigree when it comes to alternative assets, representing nine of the 100 largest private equity investors globally, according to PEI’s Global Investor 100. The most bullish of these, Yale University, has allocated 41.6 percent – or about $13 billion – to the asset class.

“In the long run, each university in Japan will manage their own endowment,” Tomita said. “It takes time, but I want to contribute to making such an ideal endowment market in Japan, and this is the first step. From a longer-term perspective, I want to work with and educate younger staff, and then I believe LP talent will increase more.”

The Japan Science and Technology Agency is a relatively active investor in venture capital deals, primarily seed and early stage investments in biotech and pharma start-ups. It has completed one such deal this year, following two last year, two in 2020 and four in 2019, according to data from PitchBook.

JST was one of nine investors in a $10.5 million Series B round in March for QunaSys, a Tokyo company working on software to accelerate the practical application of quantum technology, PitchBook reported.

Additional reporting by Lawrence Aragon for Venture Capital Journal