U.S. and Japanese LPs: A Comparative Perspective
Introduction
While Japan and the United States both use Limited Partnership structures in their private capital markets, the behavior, risk appetite, and strategic priorities of LPs in each country differ dramatically. These differences are rooted in deeper cultural, regulatory, and institutional factors. For U.S. LPs exploring cross-border relationships or seeking Japanese capital, understanding these dynamics is essential.
Structural Foundations and Offshore Preferences
At a legal and structural level, both countries use Limited Partnerships governed by similar fund terms, including the “2 and 20” model. However, Japanese LPs often favor offshore vehicles—especially Cayman Islands Exempted Limited Partnerships—over domestic ones, even for local investments. By the end of 2022, Japanese investors held JPY 87.6 trillion in Cayman Islands funds, which accounted for 67.3% of their offshore investment vehicle use. This preference is due in part to regulatory ease and tax efficiency.
Source: Maples Group, Exploring Japan’s Evolving Investment Landscape (2023)
Quote:
“At the end of 2022, Japanese holdings in Cayman Islands investment funds amounted to JPY 87.6 trillion.”
“The Cayman Islands currently attracts more than two thirds (67.3%) of Japanese investments in overseas investment funds.”
Types of Insitutions
In Japan, the Limited Partner landscape is dominated by large public institutional investors, most notably the Government Pension Investment Fund (GPIF), which manages over ¥258 trillion (~$1.7 trillion USD), making it the largest pension fund in the world. Corporate pensions and local government funds are also active, but to a significantly lesser extent. Other categories such as family offices, university endowments, and insurance firms exist but represent a relatively minor portion of LP activity, and detailed allocation data is limited.
By contrast, the U.S. LP ecosystem is broader and more diversified, comprising a wide range of actors including public pension funds, corporate pensions, family offices, insurance companies, university endowments, and foundations. U.S.-based LPs tend to exhibit more transparent investment behavior, often disclosing fund commitments and allocations publicly. This diversified base contributes to a more dynamic and competitive fundraising environment in the United States compared to Japan, where the institutional capital pool is highly concentrated.
“Japanese pension fund market is a highly concentrated one, with no less than 92 per cent of total assets under the control of just one fund: the giant Government Pension Investment Fund (GPIF).”
— Hedgeweek, Raising Assets in Japan
“GPIF is the largest public pension fund in the world.”
— Hay Insights, Pension Fund Japan Investment Strategies
“The Japanese institutional LP base is largely limited to public pension funds and corporate pensions, with family offices and university endowments playing only a minor role.”
— Maples Group, Exploring Japan’s Evolving Investment Landscape
“US LPs are generally more diversified, with meaningful participation from pensions, endowments, foundations, family offices, and insurance companies.”
— Cambridge Associates, via Private Equity International, 2023
“Public pension funds in the US are required to disclose their private equity commitments and performance, which creates a level of transparency not seen in most other countries.”
— Institutional Limited Partners Association (ILPA), Best Practices Guide (accessible to members at https://ilpa.org)
Risk Appetite and Allocation Behavior
Japanese LPs are generally more risk-averse and underexposed to private market assets compared to U.S. institutions. For example, the Government Pension Investment Fund (GPIF)—the world’s largest pension fund—had only 1.6% of its ¥258.7 trillion portfolio in alternatives like private equity and infrastructure as of early 2025. This is well below its permitted 5% cap. In contrast, large U.S. public pension funds such as CalPERS or CalSTRS routinely allocate 5–10% or more to private equity.
Source: Reuters, Japan lawmakers urge pension fund to invest in domestic private equity (2025)
Quote:
“Presently, alternative assets like private equity, property and infrastructure represent only 1.6% of the GPIF’s ¥258.7 trillion … portfolio, well below its 5% allocation cap.”
Strategic vs. Financial Orientation
In Japan, LPs—especially corporates and sovereign entities—often invest with a strategic agenda. A leading example is AN Venture Partners I, LP, a biotech fund that closed at USD 200 million in 2025 with backing from over 20 LPs, including Shionogi, Otsuka Pharmaceutical, MUFG, and the Japan Investment Corporation (JIC). The fund aligns with Japan’s national biotech strategy and represents the growing role of government-backed LPs in strategic capital deployment.
Source: AN Venture Partners press release, Final Close of $200M Fund I (2025)
Quotes:
“AN Venture Partners I, LP is a USD 200 million fund that closed in June 2025 … backed by more than 20 Limited Partners (LPs).”
“Limited Partners include Japan Investment Corporation (JIC), Shionogi & Co., Ltd., Otsuka Pharmaceutical, MUFG, and Sumitomo Mitsui Banking Corporation.”
Corporate LP Collaboration Models
The role of corporate LPs in Japan also reflects the country’s collaborative and long-term ethos. Sony Innovation Fund 3, for example, invited outside LPs such as Sumitomo Mitsui Trust Bank, Kawasaki Heavy Industries, and Mitsubishi Estate. The fund allows these LPs to participate in investment decision-making while maintaining independence from Sony’s internal operations. These LPs gain early access to innovation, business insights, and partnership opportunities with Sony and its portfolio companies, forming what Sony calls a “tripartite win‑win‑win relationship.”
Source: Sony Innovation Fund, LP Interview Document (2024)
Quotes:
“These funds incorporate a structure that welcomes LP (Limited Partner) investors who do not directly invest in startups … enabling investment activities with a decision‑making process independent of Sony’s core operations.”
“LPs benefit from insights into global market movements and technological trends, as well as an understanding of Sony’s evaluations. Additionally, the potential for collaboration with portfolio companies, Sony’s business units, and LP firms exists, fostering a tripartite win‑win‑win relationship among startups, LPs, and Sony.”
Summary
While the LP structures in the U.S. and Japan may appear similar on the surface, their function and behavior diverge due to cultural, regulatory, and institutional forces. U.S. LPs tend to prioritize return maximization, diversified risk, and transparency. In contrast, Japanese LPs emphasize caution, strategic alignment, and long-term relationship-building—particularly within corporate and government-linked entities. Understanding these nuances is essential for GPs seeking Japanese capital, and for U.S. LPs interested in forming partnerships with Japan-based funds or co-investors.
