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Orix Diversifies into Private Equity Amidst Stagnant Growth in Core Sectors

Japanese Finance Giant Orix to Launch $1-$2 Billion Buyout Fund, Eyeing Expansion in Asset Management
Japan
o 8591.TSE Blue Chip 150
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Japanese financial conglomerate Orix is set to venture into the private equity arena with the launch of a new buyout fund in 2024, aiming to raise $1 to $2 billion. This move comes as the company anticipates limited growth in its traditional leasing and banking segments, even with potential interest rate increases. Orix’s President and CEO Makoto Inoue expressed skepticism about achieving high returns from a modest rise in interest rates.

Historically, Orix has relied on self-funded investments, providing capital and business support to companies before either listing them on the stock market or selling them to other buyers. Notable successes include the profitable sale of accounting software developer Yayoi to U.S. equity firm KKR in 2022 and significant investments in Japanese companies like DHC and Toshiba.

The new fund represents a strategic shift for Orix. By attracting external investment, Orix aims to acquire companies without increasing its own risk assets, thus safeguarding its credit rating. Additionally, management fees from the fund are expected to provide a stable income stream.

Orix, which already owns Dutch asset manager Robeco and operates real estate investment trusts in Japan, has ambitious plans for its asset management business. With domestic and international assets under management totaling 60 trillion yen as of September, the company targets growth to about 200 trillion yen, aligning with leading asset managers in the U.S. and Europe.

Inoue also highlighted the potential benefits of a stronger yen, anticipated with the expected end of Japan’s negative interest rate policy in 2024. With over 30% of Orix’s operating assets overseas, a robust yen would facilitate more accessible international investments, underscoring the company’s focus on global expansion. This diversification reflects Orix’s adaptability in a changing financial landscape and its commitment to finding growth opportunities beyond its traditional markets.

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