The recent growing momentum of private equity funds

Koki Watanabe, Kosuke Igarashi and Hiroki Inaba
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Koki Watanabe: Bank of Japan
Kosuke Igarashi: Bank of Japan
Hiroki Inaba: Bank of Japan

No 18-E-1, Bank of Japan Review Series from Bank of Japan

Abstract: 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.

Date: 2018-04-05
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