Dalton Investments, the Los Angeles-based fund with $1.3bn in assets, will merge its Japanese unit with real estate investment specialist Lexington Corp to cut costs and help raise funds as markets recover.

The merger will save Dalton as much as 40 million yen ($440,000) annually, said Junichiro Sano, who will become Dalton’s Japan representative after the deal is completed at the end of this month. Lexington now advises Dalton on real estate.

Dalton is also targeting acquisitions in Japan to supplement asset-management licenses Lexington doesn’t hold, he said.