TOKYO May 26 A new Japanese investment fund is
set to join a small but growing band of "friendly" activists,
shunning hostile tactics that have previously failed to generate
change and instead working with management to improve
Yasunori Nakagami, chief executive and co-founder of newly
established Misaki Capital, said he plans to launch an
open-ended fund in July with a brief to invest in around 15
Japanese companies where he sees capacity for growth - with
advice from shareholders such as himself.
"There are companies that have good CEOs but aren't too good
with marketing. They might have a good CEO but also a weak chief
financial officer," Nakagami told Reuters in an interview. "We'd
rather go for companies that are good but could be much, much
Nakagami formerly led Japan's Asuka Value Up Fund, which at
its peak held nearly 50 billion yen ($491 million) under
management. He didn't disclose how much Misaki plans to raise
for the open-ended fund.
The launch makes Nakagami the latest money manager in Japan
to seek better return on equity (ROE) through cooperation rather
than confrontation. He didn't specify sectors of the economy in
which Misaki would invest, but said the fund will only seek
shares in companies that are responsive to its "constructivist"
In Japan hostile tactics by funds such as Steel Partners and
the Children's Investment Fund, urging higher dividends and
strategy changes, have rarely succeeded. Steel Partners did
manage to dismantle management at Japanese wig maker Aderans Co
in 2008, but it tried and failed to replace directors
at brewer Sapporo Holdings Ltd in 2010.
U.S. private equity company Cerberus was locked in a dispute
last year with railway and property conglomerate Seibu Holdings
last year, when Cerberus tried and failed to take
control of the company's board.
Nakagami said that while hostile activists had a role to
play in shaking up poorly managed companies, a background in
corporate consulting led him to focus on companies willing to
work with him on improving operations.
He noted the average ROE among Japanese companies was around
5 percent, due to thin operating margins, compared to over 15 in
the United States and other developed markets. Low ROE has been
cited as one reason many foreign investors find Japan's equity
market relatively unattractive.
Taiyo Pacific Partners, a "friendly" activist fund based in
the United States but focused on Japan, recently participated in
a joint 42.6 billion yen management buyout of musical
instruments maker Roland Corp. Taiyo was also chosen
last month as one of the asset managers for Japan's giant
Government Pension Investment Fund in an apparent endorsement of
Sparx Group Co, another "friendly" fund, said it
would invest in companies it saw as undervalued and open for
engagement with investors.
The rise of such funds coincides with Prime Minister Shinzo
Abe's push to improve engagement between investors and Japanese
companies in a bid to double inbound foreign direct investment
The government recently launched a stewardship code aimed at
holding institutional investors more accountable and has been
promoting a new index called JPX400 which takes ROE into
($1 = 101.8250 Japanese Yen)
(Reporting by Ritsuko Ando and Emi Emoto; Editing by Kenneth