The Overview and Risks of Fund Finance
June 19, 2023
KANAGUCHI Takehisa, KAWAKAMI Takehito*,HASEBE Akira, OGAWA Yoshiya*
Financial System and Bank Examination Department
*Currently at the Personnel and Corporate Affairs Department
The funds see an increase in their financing demand, depending on their own investment stage, as the inflow into private equity funds and other funds continues. Under these circumstances, financial institutions promote their businesses based on the high profitability of Fund Finance. In addition, they have established a risk management system that pays attention to the risk characteristics associated with such finance. On the other hand, the funds lengthen loan terms and increase the leverage of Fund Finance in order to boost investment returns to investors, and increasing risks associated with Fund Finance have been identified. Therefore, it is important to understand the real picture of Fund Finance and carefully monitor its potential risks.
Notice
The Bank of Japan Review Series is published by the Bank to explain recent economic and financial topics for a wide range of readers. This report, 2023-E-5, is a translation of the Japanese original, 2022-J-15, published in October 2022. Views expressed are those of the authors and do not necessarily reflect those of the Bank.
If you have any comments or questions, please contact Financial System and Bank Examination Department (E-mail: post.fsbe68@boj.or.jp).