From leasing and lending to investing its own capital (2014)

The author’s view

The essence of this shift was that ORIX moved its source of earnings from an interest spread to an investment return, and reread the absence of a “base” — no licences, no plant — as a strength rather than a weakness. Being able to invest its own money without being bound to a redemption date gave the company a time horizon unlike that of a borrowing-dependent fund. Nor should it be overlooked that the wound taken in the Lehman shock was itself the occasion for breaking with excessive leverage.

On the other hand, the shape of an investment company makes it harder to measure. When the territory widens to the point that no single sentence describes what the company is, the merits and errors of individual investments are easily buried inside a record group profit. How far the investments accumulated under a tailwind of low interest rates will hold up against rising rates or a turn in the market is still to be seen. Whether the breadth obtained at the cost of diluting the founding trade works as a strength in the next crisis is the question that will be put.