Recent Developments in Private Funds -- Increasing Presence of PE and PD Funds and Their Recent Traits

Keita Takemura, Yuko Iwamura and Makoto Kutsunugi
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Keita Takemura: Bank of Japan
Yuko Iwamura: Bank of Japan
Makoto Kutsunugi: Bank of Japan

No 26-E-3, Bank of Japan Review Series from Bank of Japan

Abstract: Private equity (PE) funds and private debt (PD) funds have expanded their assets under management since the global financial crisis, especially in the United States. Recent developments have indicated subdued performance of PE funds, reflecting factors such as a decline in valuations of portfolio companies following the rise in foreign interest rates. Exit timelines for portfolio companies have also been extended. PD funds have demonstrated robust performance, supported by wide lending spreads; however, spreads are showing a tightening trend amid intensifying competition. Furthermore, while the portfolio companies of both PE and PD funds have maintained robust business performance, they are facing increasing interest payment burdens, warranting close attention to their creditworthiness. It is important to closely monitor future developments in this area, as Japanese banks and domestic institutional investors have increased their interconnectedness with PE and PD funds through investments and lending, which may have an impact on Japan's financial system.

Date: 2026-04-21
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