INTERVIEW-UPDATE 2-Daiwa Sec eyes $4.5 bln private equity fund

(Adds comments from Daiwa CEO)

By Junko Fujita and Emi Emoto

TOKYO, Aug 12 (Reuters) - Daiwa Securities Group Inc (8601.T), Japan's second-largest brokerage, said on Tuesday it may set up a $4.5 billion private equity fund as it seeks to diversify further beyond stocks, bonds and investment banking.

Daiwa Securities Chief Executive Officer Shigeharu Suzuki told Reuters in an interview that the fund would be separate from another that Daiwa operates using its own cash and that it is also seeking to expand.

"This market will definitely grow bigger. There will always be trade in assets," Suzuki said.

"Who will profit most from this? That would be those making the investments, rather than the investment banks advising on the deals."

The new 500 billion yen ($4.5 billion) fund could be set up in three to four years, he said.

Daiwa Securities SMBC Principal Investments, the unit that makes investments with Daiwa's own cash, has spent 436 billion yen investing in private equities, real estate and non-performing loans.

Daiwa wants to cap this amount at about 600 billion yen to avoid risk.

But the brokerage is still keen on private equity and will ask investors to invest in the new fund, Suzuki said.

The money may be put into a global fund or one focusing on Asia, or it may be divided up to focus on both areas, he said.

Through the fund, Daiwa would be willing to make single investments as large 100 billion yen, he said.

REAL ESTATE

Suzuki said Daiwa also wants to expand its real estate business to stabilise its revenue sources.

"We need to change our business model, which depends on stock and bonds," he said.

Daiwa is considering buying more than a 50 percent stake in Pacific Holdings Inc 8902.T, an operator of two real estate trusts, Suzuki said. [ID:nT133167]