Nippon Life Insurance Co. has reached a deal to acquire 24.75 percent of U.S. investment firm TCW Group Inc. from U.S. asset manager Carlyle Group LP, the companies said recently.
While terms were not disclosed, a person with direct knowledge of the matter said the company, Japan’s biggest private-sector life insurer, would pay about ¥55 billion ($488.37 million). Nippon Life and Carlyle declined to comment on the price.
Nippon Life, which will have two seats on TCW’s board, said the transaction should close this month, pending regulatory approval.
The insurer is the latest Japanese company to increase its presence in asset management, which is seen as a promising way to accelerate growth amid low interest rates and stricter capital regulations at home.
Mitsubishi UFJ Financial Group Inc. has said it is ready to spend up to ¥1 trillion ($8.88 billion) in acquisitions.
Yet many officials at Japanese companies acknowledge difficulties in asset management deals, with retention of fund managers the biggest challenge.
“It’s risky to buy asset management companies outright,” said a president of a major banking group who requested anonymity. “What happens if fund managers leave after acquiring control?
“We’d be best starting with a minority stake and building it up after we gain the trust of key staff,” the executive said.
Los Angeles-based TCW provides products in fixed income, equities, emerging markets and alternative investments. It had $191.6 billion in assets under management as of the end of 2016, with slightly more than 80 percent in U.S. bonds.
After Nippon Life’s investment, staff will hold 44.1 percent of TCW.
Carlyle will retain a 31.2 percent stake through Carlyle Global Partners, a $3.6 billion private equity long-duration fund that invests beyond the industry’s traditional 10-year time frame.
U.S. rival Blackstone Group LP and European peer CVC Capital Partners Ltd are among the major private equity firms that are also opting to hold assets for a longer period.
Such moves are gaining traction because keeping portfolio companies longer can boost returns by eliminating the recycling of capital, as one asset gets sold and another is acquired. By avoiding such periods when investors’ capital sits idle, private equity firms can promise lucrative and steady profits.