Misaki Eyes New Fund as Assets Soar on Endowment Demand

  • Assets under management rose to $300 million from $40 million
  • Misaki's fund seeks to engage with companies to boost profits

Misaki Capital Inc., a Japanese activist firm that uses friendly means to help companies increase profits, may set up a new fund after a surge in demand from overseas investors boosted assets under management by more than sevenfold in the past year.

The Tokyo-based firm, which manages $300 million, is considering setting up a co-investment pool that will be open to investors in its current fund, the Misaki Engagement Fund, according to co-founder Masaki Gotoh. The co-investment fund will enable Misaki to add to stakes in companies and provide additional financing to them when needed.

Investors around the world are looking for alternative assets that offer better returns amid slower global growth, a slump in major equity indexes and declining bond yields as central banks embrace negative interest rates. The Misaki Engagement Fund returned more than 15 percent in 2015, compared with the Topix’s 9.9 percent.

“We’ve seen a surge in investment opportunities,” Gotoh said. “For companies that were too expensive to invest before, they are cheaper now, even though there is no real fundamental change to their value.”

Overseas investors such as endowments and funds of funds now account for about half of the firm’s assets under management, while Japanese institutions and pension funds account for the rest, Yasunori Nakagami, Misaki’s chief executive officer, said in an interview.

Engagement Fund

The Misaki Engagement Fund -- set up to draw companies into dialog and advise them on ways to boost profit -- had $40 million of assets as of March last year. A co-investment fund will enable Misaki to increase its stakes in firms it’s already invested in because of limits on how much the engagement fund can commit to them, Gotoh said.

Misaki said Thursday it lifted its stake in Heiwa Real Estate Co. to 8.7 percent from 7.5 percent, making it the biggest shareholder after Mitsubishi Estate Co., Japan’s biggest developer, and the Master Trust Bank of Japan Ltd., according to filings to the Tokyo Stock Exchange. It acquired a 5.1 percent stake in Sakai Moving Service Co. in the same month.

Misaki is looking to partner with Heiwa to redevelop 100,000 square meters (1.1 million square feet) of land in central Tokyo and may bring in other investors when needed, Gotoh said. Heiwa owns 11 buildings, including the Tokyo Stock Exchange, in the historic Nihonbashi financial district and plans to redevelop the land over the next 10 years.

“Mitsubishi Estate has been working with Heiwa on redevelopment projects in the area,” said Nakagami. “We would like to provide support from a different angle such as concept and finance.”

Heiwa’s shares rose as much as 3.5 percent Thursday and were 2.3 percent higher at 1,421 yen at the lunch break in Tokyo. Sakai Moving gained 2 percent to 3,095 yen.

Heiwa declined 14 percent in the past year, and Sakai dropped 13 percent from its peak on Nov. 30. Heiwa’s price-to-book ratio is 0.6 times, the lowest among its peers, while Sakai’s price-to-earnings ratio fell to 13 times from a peak of 15 times in December, according to data compiled by Bloomberg.

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