Daiwa Securities Group, Mercuria Investment, and Irish lessor Airborne Capital are planning to establish a Japan-based aircraft investment fund with a target of ¥150 billion in assets over three years. This fund aims to introduce a semi-liquid structure allowing investors to subscribe or redeem every six months—an unusual feature in the aviation finance sector, which traditionally favors long-term locks.
The proposed fund will focus on single-aisle aircraft, considered the workhorses of the short and medium-route market, and intends to deliver an internal rate of return between 8% and 10%. Mercuria is expected to manage the fund with support from the Development Bank of Japan, while Daiwa’s asset-management units will assist in investor acquisition.
This innovative approach could attract more Japanese investors to aircraft leasing—a market typically characterized by long lockups—potentially affecting aircraft prices and lease terms. However, the success of this structure hinges on the fund’s ability to sell or refinance aircraft during credit-tightened periods, a significant challenge in the sector.
This initiative reflects a broader trend where private market strategies emulate public market liquidity features. While offering attractive returns, the approach also introduces risks associated with periodic liquidity and market stress. Its real success will depend on effective management during downturns, showcasing the evolving landscape of aviation investments in Japan.
