JIC publishes Fund Investment Guideline

Tokyo, March31, 2025 – Japan Investment Corporation (“JIC”) has published its fundinvestment guideline for LP investment perspectives including alignment withJIC's investment criteria, expected performance, and governance standards. JIC primarily invests in private venture capital and buyout funds.

JIC's mission is to create a virtuouscycle of risk capital that supports the next generation of domestic industriesby providing funds to help companies grow and strengthen their competitivenessthrough open innovation, promotion of private investment, and the developmentof investment professionals. To achieve its mission, JIC invests inpolicy-relevant strategic business areas through LP investments in funds underJIC’s umbrella and in private funds.

JIC has also established investment themesthat focus on areas where private-sector funding is scarce, and it invests infunds that align with these themes. In its investment process, JIC carefullyconsiders factors such as fund structure and the composition of the investmentteam. By announcing its investment guidelines, JIC aims to further clarify theperspectives it uses to evaluate potential investments and will continue tomake decisions based on mutual understanding.

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JIC Fund Investment Guideline

JICis an institutional investor that primarily invests in venture capital andbuyout funds focused on Japanese market. Fund selection is based on several guideline,including alignment with JIC's investment criteria, expected performance, andgovernance standards. JIC's goal is to encourage open innovation in Japan, makeJapanese industries more competitive, and grow the ecosystem by providing riskcapital through these funds.

Basic Guideline

Structure and Organization

・   The organization must beoperated by a fully independent investment team, not a captive structure.

・   The team must be dedicated tothe fund business, without any other activities that could create a conflict ofinterest.

Investment Team

・   The investment team shouldconsist of full-time professionals whose sole responsibility is managing thefund, with no outside business interests that could create conflicts.

・   The investment committeemembers should primarily consist of core members from the management companyresponsible for fund operations.

・   The fund or investmentprofessionals should have a track record that aligns with the fund's investmentstrategy.

Economic Conditions

・   The standard carried interestrate should be 20%.

・   Additional payment (interestcharge) incurred by subsequent LPs should be fairly allocated to existing LPswho participated before the relevant closing.

・   The European waterfall modelshould be the preferred distribution method.

Alignment and Governance

・   The GP commitment, key persons,and allocation of carried interest should all be aligned and consistent.

・   For managers with multiplefunds employing distinct investment strategies, a clear allocation policyshould be proposed.

・   Conflict of interest mattersshould principally require approval from the advisory committee.

・   An annual general meeting andadvisory committee meeting should be held at least annually.

・   Conduct fair value assessments.

(This includes fair value assessmentsof unlisted securities and the deduction of potential carried interest from LPinterests in the capital account.)

Others

・   JIC's commitment as aproportion of the total among limited partners should principally be less than50%, and any funds exceeding JIC's commitment amount should be raised fromprivate investors.

・   The managers must comply withJIC's requirement to form Code of Conduct / Code of Ethics (8 items) andAnti-Harassment Policy (10 items).

・   The managers are required toestablish and maintain a legal compliance system that meets key regulations,including the Financial Instruments and Exchange Act and anti-money launderinglaws. Additionally, they must implement an effective information managementsystem to properly safeguard personal and insider information.

・   The fund size shouldprincipally exceed 6 billion yen.

Through itsinvestment activities, JIC is exploring building relationships with overseasVCs that show interest in investing in Japanese startups and are expected tosupport their international expansion. In addition to the aforementionedguideline, JIC will conduct an additional evaluation of overseas VCs based ontheir historical track records and achievements in supporting their portfoliocompanies. This will help determine the VC's unique capability to assistJapanese startups.

JIC aims to develop a robust domestic investment ecosystem byadopting global standards. In addition to the above guideline, JIC will makeinvestment decisions based on comprehensive evaluation through dialogue withGPs, while also referencing the guidelines and model contracts established bythe Institutional Limited Partners Association etc..

For any inquiries regarding this information, please reach out toJIC. 

(Reference) JIC fund investment strategy

(For reference)

Objectives of JIC’s LPinvestments

1. Stimulate the supply of risk capital to help companiesgrow and to enhance their competitiveness

JIC intends to provide capital to areas that areessential from the perspective of strengthening industrial competitiveness butlack private investment capital (investment strategies, sectors, stages,regions, etc.) with the aim of stimulating private investment capital in theshort term and medium-long term.

2. Create diverse investment teams, professionals, andstrategies to support a virtuous cycle of risk capital

1) Investmentteams

JIC promotes growth of the investee fundsas a leader in the intermediary of risk capital provided by institutionalinvestors (pension funds, foreign investors, etc.) towards the establishment offuture funds. This will be achieved by expanding experience and track recordsamong its fund investment team (management company) and by further improvingits ability to respond to institutional investors.

2) Investmentprofessionals

With the cooperation of industryorganizations such as JVCA, institutional investors, and investee managers, JICsupports the research and introduction of best practices of managers and thedevelopment of human resources serving as investment professionals.

3) Investmentstrategy

JIC will add diversity and depth to themarket by making an LP investment in funds even for those with strategies thatare not common in Japan yet, in response to their fund raising, including atthe time of its establishment.

About Japan Investment Corporation (JIC)

Japan InvestmentCorporation (“JIC”) was established in September 2018 under the IndustrialCompetitiveness Enhancement Act. JIC’s investment focus areas are creating avirtuous cycle of domestic investment and innovation; creating  and fostering startups; leveraging promisinguntapped management resources lying dormant in local areas, including startupsfrom academia and medium-sized companies; and promoting business restructuring inresponse to changes in market and business environments. JIC provides riskcapital to these areas through funds independently established by JIC and LPinvestment in private funds to promote open innovation in Japan, strengthen thecompetitiveness of Japanese industries, and contribute to expansion of Japan’s investmentecosystem.