Status of Functions of Public Quasi-Equity Funds in Japan: Possibilities and Risks of Public-Private Funds

This paper analyzed three hypotheses concerning public-private investment funds. The analysis obtained the following three major conclusions: (1) Under some existing investment projects, it has been possible to pursue policy objectives and profitability, and those projects have been effective in inducing other investments (pump priming effect). On the other hand, regarding risk factors, the analysis indicated the presence of the risks that policy objectives may be susceptible to discretionary interpretation and that private businesses may be squeezed out. Most of the funds so far recollected are investments in large-scale projects, while it will be required for future recollection of funds from small-scale projects. (2) The governance exercised by the government over public-private funds has worked to some degree, as funds for which cumulative losses had expanded were subjected to review at a relatively early stage. As for risk factors, the investment period for some public- private funds (which has been set under the sunset clause) has been extended, which means that the governance over organizations operating the funds may not necessarily be functioning adequately. (3) With respect to training of personnel to acquire investment skills, people who have left public-private funds after cultivating investing experience tend to be working uccessfully in the private sector. As for risk factors, the analysis indicated the need for strict enforcement of the sunset clause.