Fundraising In Japan: Opportunistic Or Long-Term Play – A Regulatory And Marketing View
The article looks at the regulatory and marketing implications of raising money in Japan for types of fund manager, such as those in the alternative asset class space.
The author of this article is Cathy Brand, CEO Sales Road Maps Online Ltd.® – someone who has written in these pages before about compliance and strategy in the financial world. The usual editorial disclaimers apply to views of guest contributors. Jump into the conversation! Email email@example.com
When clients ask us about fundraising in Japan, we advise them to think about Japan as a “long-term play” for fundraising and not an opportunistic “short-term play.” Below is the regulatory and marketing analysis to back up our views.
What is an opportunistic approach to AIF marketing?
An opportunistic approach to AIF fundraising is when AIFMs send out their initial marketing collateral (i.e., a two-pager describing their AIF) to potential clients in as many countries as they can (i.e., 70 countries) to see what “sticks.”
While this opportunistic approach may be viewed by sales teams as a way to generate potential client interest in the AIFM’s fund, it may backfire if you get interest from clients in countries where the restrictive regulations don’t permit you to market there and/or in countries where you have to do a lot of work to register your fund, comply with licensing rules, while incurring costs and devoting time to simply deliver the fund to your potential client.
What is a strategic approach to AIF marketing?
Fundraising cross-border (overseas) should commence after the AIFM investigates the local marketing regulations (not before). We always advise clients not to send any fund marketing collateral into any country without checking the fund marketing regulations first.
In order to fundraise in one’s AIF in an efficient manner with the least amount of time and cost, we advise clients to focus marketing efforts using a strategic approach to selecting countries that represent “low hanging fruit.”
Benefits of a strategic marketing approach
A strategic approach to fundraising can prevent an “egg on your face” result with potential clients who receive your two-pager and respond with, “Why did you send me your AIF two-pager? You cannot legally market your fund in my country due to AIF marketing restrictions.” Or “Is your AIF registered and are you compliant with our licensing rules? When can we receive an AIF PPM, we cannot wait months to see your fund documentation.”
Focus on “low hanging fruit” countries
To raise capital in your fund from investors across the globe, you have a choice of countries in which you can market your fund. Each country has different regulatory regimes to each other for the purposes of cross-border marketing.
We use the analogy of a marketing tree bearing fruit. In the spirit of fundraising efficiency, it can be beneficial for AIFM/asset managers to target countries with easy to fulfil, developed marketing regimes with clear regulations for the purposes of marketing your AIF. These countries are “low hanging fruit.”
We define “low hanging fruit” countries as those that have robust private placement fund marketing regulations (no requirement to register your fund with the local regulator), robust licensing exemptions (no requirement to register for a fund marketing/broker-dealer licence) and defined categories of institutional and exempt investors under available private placement exemptions to whom you can market your fund, with little to no ongoing regulatory reporting or filings. Easy.
Picking “low hanging fruit” from the marketing tree can provide
quick, easy wins on AIF fundraising due to the country’s
regulatory ease and you can benefit from mitigated five key