ORIX Corporation USA in May said it was building a team to invest in GP-led deals, joining a growing list of asset managers with their sights set on the secondaries mid-market.
The Dallas-headquartered subsidiary of Japanese conglomerate ORIX Holdings has $26.5 billion in third-party assets under management, $11.3 billion in proprietary assets and $47.2 billion in assets under servicing and administration invested across private equity, corporate lending, venture finance, commercial real estate, and municipal finance.
Jed Johnson, senior managing director and portfolio manager for private markets at multifamily office CH Investment Partners, joined in April to lead the team. He speaks to Secondaries Investor about the firm’s plans.
Why has ORIX USA decided to build a team dedicated to GP-led secondaries?
The GP-led secondaries market has grown significantly in recent years and remains underserved by dedicated capital providers. The market was $2 billion 10 years ago and has grown almost 50 percent annually to nearly $70 billion last year. Capital formation hasn’t kept pace and the vast majority of transactions require a syndicate of investors to cross the finish line.
Our GP-led strategy is a natural complement to other investment strategies we manage, including middle-market lending arm NXT Capital and our venture lending growth capital business, which provide key capital solutions to sponsors. Entering the GP-led secondaries market is an exciting opportunity to build on ORIX USA’s history as a trusted capital partner to the middle markets.
What does an ideal ORIX USA GP-led deal look like?
ORIX USA is an established leader in the US middle market through NXT Capital, our leveraged finance group Signal Peak Capital, private equity arm ORIX Capital Partners and other investment platforms within the ORIX USA family of companies. We expect our GP-led secondaries investment strategy will reflect that focus.
Do you intend to lead GP-led deals or invest as part of the syndicate?
Our goal is to invest in the highest-quality companies in partnership with highly aligned private equity GPs. We are comfortable as either a lead or syndicate investor. That said, given our focus on the middle market, we expect to have ample opportunities to play a lead or co-lead role in deals.
Can you give an idea of when you will look to raise third-party capital and how much you are likely to target?
In the near to medium term our focus is on investing ORIX USA balance sheet capital. As we build our team, portfolio, and market position, that will create opportunities to partner with third-party investors.
What are the next steps in terms of your growth strategy? Where do you expect the team to be in 24 months’ time?
We are midstream on making select additions to our team and actively evaluating investment opportunities. The market, as you know, is incredibly active. We’re excited about building our portfolio and expect to have a lot more to talk about in coming months.
Jed Johnson is managing director and head of the GP-led secondaries team at Orix Corporation USA. He was previously a senior managing director at multifamily office CH Investment Partners