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Apollo Eyes Expansion in Japan, Where Pension Funds Are Piling Into Alternatives

The private equity giant has hired Bain Capital managing director Tetsuji Okamoto as its first head of Japan.

Alternative investment firm Apollo Global Management plans to build out a private equity business in Japan, a country where historically conservative pension funds are increasingly shifting capital into alternatives.

Apollo announced Thursday it had hired Tetsuji Okamato as partner and head of Japan, a newly created role at the firm. Okamato, previously a managing director at Bain Capital, will “play a lead role in building Apollo’s private equity business in Japan, including originating and executing deals and identifying cross-platform opportunities,” according to the firm’s statement. Okamato will report to Steve Martinez, senior partner and head of Asia Pacific.

In a joint statement, Apollo co-presidents Scott Kleinman and James Zelter said the appointment reflected the “importance we place on Japan and the opportunities we see in the wider region for growth and diversification.”

At Bain Capital, Okamato served as a member of the firm’s Asia Pacific private equity team for 11 years, overseeing the execution processes for new deals and existing portfolio companies in Japan. Previously, he was a vice president at Ripplewood Holdings, where he executed private equity investments in Japan’s auto, consumer, and technology industries.

“Tetsuji’s addition signals Apollo’s meaningful long-term commitment to expanding its presence in the Japanese market, which we view as a key area of investment focus as we seek to build value and drive growth for Japanese corporations and our investors and limited partners,” Martinez said in a statement.

The move comes as alternative investments such as private equity are picking up speed among Japanese pension funds, which until the 2000s invested the majority of their assets in fixed income. Japanese corporate defined benefit funds surveyed by J.P. Morgan Asset Management this year said they were targeting a 21.3 percent allocation to alternative investments, up from just 12.8 percent in 2015.

[II Deep Dive: Japanese Pensions Push Hard Into Alternatives]

According to J.P. Morgan, this was the first time that targeted allocations to alternatives surpassed domestic bond targets, which averaged 18.1 percent. Local pension allocations to the country’s bonds have fallen as the Bank of Japan has maintained interest rates at and below zero, prompting domestic investors to turn to global bonds and alternatives for returns.

“Alternatives have moved from the periphery of Japanese pension fund portfolios to now being a primary destination,” Akira Kunikyo, investment specialist at J.P. Morgan Asset Management, said in a statement in August, when the survey was released.

Kunikyo added that the J.P. Morgan was seeing heightened interest by Japanese corporate pensions “specifically in illiquid assets such as infrastructure and real estate, suggesting institutional investors are turning to alternatives not just for higher returns and diversification but for stable income generation.” 

As of the fiscal year ending March 31, Japanese defined benefit plans allocated 2.2 percent of their portfolios to real estate and 1.3 percent to infrastructure. Private equity, meanwhile, made up 1.7 percent of Japanese pension portfolios on average, while absolute return strategies, the most popular alternative investment, accounted for 8.2 percent of invested assets.

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