Tomoyuki Sugiyama, a former Lloyds Banking Group Plc bond trader, plans to start a fund that will invest in non-performing subprime loans in Peru as early as April to meet rising demand among retail investors in Japan.
Sugiyama founded Tokyo-based Crowdcredit Inc. in January 2013 and plans to first raise 15 million yen ($147,400) to invest in the Peruvian loans for three years, targeting an internal rate of return of 11 percent, he said. The fund will buy loans that have been in default for three months or more from Peruvian financial institutions at 3 percent of face value, allowing Crowdcredit to potentially collect double or triple the initial cost as creditors repay, he said.
Japanese individuals, which have about $16 trillion in household assets, are searching for investments abroad with higher yields amid low interest rates at home. They are tapping the South American nation where former leader Alberto Fujimori is credited with laying the foundations of an economic boom by pushing through free-market reforms and ending hyperinflation.
“A solid investment environment has been in place in Peru after the Fujimori regime with sound fiscal administration and transparency,” Sugiyama, 31, said in an interview in Tokyo. “I want to become the bridge between a country struggling to raise funds and another looking for better ways to invest.”
Sugiyama, who has been preparing the start of the first fund pending regulatory registration to market to a wider range of investors, seeks to raise 5 billion yen in the first year and 100 billion yen in five years from individual investors across several funds, he said.
Peru’s economic growth rate is among the fastest in South America and foreign exchange-reserves as a percentage of gross domestic product are the highest after China, Sugiyama said.
Gross domestic product in Peru rose 5.2 percent in the fourth quarter from a year earlier, the government’s statistics agency said last month. The country’s international reserves were $65 billion in February, according to its central bank of reserves.
Sugiyama, was a dealer and fund manager at Lloyds Banking Group in Tokyo from 2008 through 2012, where he managed 360 billion yen of surplus assets for Britain’s biggest mortgage lender by dealing low-yield Japanese government bonds, he said. Prior to that, he was a proprietary trader at Daiwa Securities SMBC Co. in Tokyo, which he joined in 2005.
Crowdcredit will collect loan repayments through the second-largest servicer in Peru with 800 telephone operators, Sugiyama said. Borrowers can get counseling to regain their creditworthiness from the servicer, while lenders can clear bad loans from their balance sheets and create new credit, he said, adding that creditors are subject to at least repaying 25 percent of the loans.
Sugiyama said he plans to raise money in Japan for funds that will invest in auto and mortgage loans in Peru. He is also interested in other countries in South America and Europe, as well as Australia for new opportunities, he said, adding that Crowdcredit will start researching Germany this year for possible fundraising.