U.S. investment fund KKR is considering entering the private credit market in Japan to provide an alternative to bank loans.
"It will be a medium- to long-term initiative,” Hiro Hirano, the head of KKR Japan said in an interview. "I think it is very important in Japan that we do it ourselves.”
The $1.7 trillion (¥267 trillion) private-credit industry has swelled in the U.S. and Europe by focusing on companies with high credit risk and private equity funds that need help financing acquisitions.
In Japan, most direct lending has been done overseas, and the domestic loan market is dominated by major banks.
In addition to private credit, Japan is the destination for about 40% of KKR’s investment in Asia.
The firm sees Japanese companies increasingly willing to sell non-core businesses that can do better as individual entities.
These so-called carve-outs often provide returns that are higher than other investments.
"An overwhelming number of Japanese companies and businesses have the potential to grow, but are not performing well enough,” he said.
The firm also plans to increase its offerings for institutional investors and high net-worth individuals in Japan.
KKR is in discussions with domestic securities companies to offer products for individual investors.
It already has a joint venture asset management company with SBI Holdings.
For institutional investors, KKR will offer wider access to its funds.
Separately, the 2022 restructuring of Marelli Holdings, a Japanese auto-parts supplier owned by KKR cost the firm the $2 billion it invested in the company.
Banks, which had lent to Marelli, lost a total of ¥450 billion.
KKR has put in another $650 million to fund Marelli’s restructuring and the firm is now profitable, according to Hirano.