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The recent growing momentum of private equity funds

April 5, 2018
Koki Watanabe*1, Kosuke Igarashi, Hiroki Inaba*2
Financial System and Bank Examination Department

  1. *1Currently at the Kagoshima Branch
  2. *2Currently at the Monetary Affairs Department

The worldwide growing momentum of private equity (PE) funds -- funds that mainly invest in unlisted shares -- has recently attracted attention among financial market participants, with inflows from investors into such funds surpassing the peak before the global financial crisis (GFC). The reasons for the increase in inflows into PE funds include that domestic and foreign institutional investors have intensified their search for yield and preference for investments generating relatively high returns amid the prolonged low interest rate environment. On the back of these active inflows, investment activities by PE funds in firms are expanding globally, helping firms with the smooth procurement of funding. Nevertheless, if going forward PE funds increase their leverage to achieve higher returns, this may pose a risk to the financial system, thus warranting a monitoring of developments in PE funds.

Notice

Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2018-E-1, is a translation of the original Japanese version, 2018-J-1, published in April 2018. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

If you have comments or questions, please contact Financial Institutions Division 3, Financial System and Bank Examination Department (Tel: +81-3-3279-1111).