Music Securities Inc., whose shareholders include Dentsu Inc. (4324) and Sumitomo Corp. (8053), aims to raise 10 billion yen ($123 million) for funds to invest in companies in the earthquake-devastated areas of northeast Japan.
The Japanese fund management company has attracted about 100 million yen for eight funds that invest in businesses ranging from a shark fin seller to a more than 200-year-old soy sauce maker in Miyagi and Iwate prefectures, Chief Executive Officer Masami Komatsu said. Komatsu, who has so far only raised money from individuals via the Internet, is planning to set up a mother fund for the investment pools to lure money from institutional investors at home and abroad.
Founded by Komatsu, 35, in 2001, Music Securities is applying its investing experience in cash-strapped musicians and sake brewers to help revive businesses in the devastated areas following the magnitude-9 temblor and tsunami on March 11. The Tokyo-based company aims to profit by funding firms trying to preserve or rebuild businesses in need of immediate financing that banks may not be able to offer quickly.
“We want to provide new means of financing and speed is crucial right now for these companies,” Komatsu said in an interview in Tokyo on May 30. “Our goal is to expand our fund- raising capacity beyond retail investors to institutional investors. Building businesses from scratch after that catastrophe requires quite an effort.”
Music Securities, which aims to reach the 10 billion yen fundraising target by the end of September, has raised about 2 billion yen across 110 funds so far, yielding an average 7 percent for those that have closed, according to the company.
For the quake revival funds, individuals can make investments in lots of 10,500 yen through its website, Komatsu said. Music Securities takes a 500 yen commission on every 10,500 yen, while the rest is split in half for donation and investment. Investors can only make returns on 5,000 yen.
Music Securities began raising money on April 25 after Komatsu and some employees visited businesses in the afflicted areas in early April, Komatsu said. He plans to open an office in Sendai city, the closest major city to the epicenter, as early as next month with one or two staff, he said.
Companies including Microsoft Corp. (MSFT), Mitsubishi Estate Co., Japan’s second-biggest developer, and Nippon Television Network Corp. (9404), a Japanese broadcaster, are backing the project, according to Music Securities.
The disaster funds now have about 3,000 individual investors and are willing to support business owners of shark fin noodles, coffee and donuts, and fishery shops located in cities including Kesennuma, a fishing community in Miyagi, and Ishinomaki, where huge swaths of the town were decimated by the tsunami, according to Komatsu.
Komatsu plans to introduce additional funds by finding more businesses to support in other areas the government has designated as disaster zones, such as Fukushima prefecture where Tokyo Electric Power Co.’s crippled nuclear plant is, he said.
“We want to be looking at the leading companies in each area for our next funds,” Komatsu said. “Some companies prefer this form of funding because they get many individuals backing their businesses and half of the funding they don’t need to pay back because they are in the form of donations.”
The catastrophe left more than 23,000 dead or missing, according to the National Police Agency. The government in March estimated damage of as much as 25 trillion yen.
The Bank of Japan last month unveiled a 1 trillion yen lending program to help companies in the quake-stricken areas. The BOJ earlier injected a record amount of cash into the banking system in daily money-market operations and doubled an asset-buying fund to 10 trillion yen on March 14.
“We’re not saying that funds don’t have to yield returns because we’re under such trying circumstances,” Komatsu said. “But we’re hearing from our investors that there are other shapes of returns, such as social and community returns, that they find rewarding. The business owners in turn are taking that pressure to rebuild.”