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UPDATE 1-Japan Post Insurance: To step up investment in risk assets in 2017/18
April 26, 2017 / 6:38 AM / 8 months ago

UPDATE 1-Japan Post Insurance: To step up investment in risk assets in 2017/18

* To increase risk assets to 12 pct from 10 pct of total by March

* To raise holdings of stocks, foreign bonds, alternative assets

* Plans to start buying high yield, EM bonds, domestic properties

* To buy some yen bonds as they are less unattractive than last yr (Adds details, quotes and background)

By Hideyuki Sano

TOKYO, April 26 (Reuters) - Japan Post Insurance Co plans to step up investment in risk assets including stocks, foreign bonds and alternative investments in the year through March 2018, investment planning officials said on Wednesday.

The insurance arm of formerly state-owned conglomerate Japan Post Holdings Co Ltd, also plans to buy Japanese government bonds (JGBs) as yields have recovered from negative levels, the officials told a news conference.

The firm, popularly known as Kampo, holds assets of over 80 trillion yen ($719 billion) and plans to boost allocation to risk assets to 12 percent of the total by March 2018 from an estimated 10 percent at the end of March 2017, the officials said.

Kampo plans to increase holdings of foreign bonds - both those with currency hedge and those without - stocks and alternative assets in the current financial year.

One target area to step up investment this year is credit products overseas, they said. Kampo currently invests mainly in U.S. investment grade bonds and bank loans but it plans to buy European assets, emerging market bonds and junk bonds this year.

“The credit spreads are quite tight both in the States and in Europe. But we think their fundamentals including fund inflows to these assets remain sound. So while we are not that bullish, we need to maintain a certain level of allocation,” said Takayuki Haruna, head of credit and alternative investment.

Kampo has been stepping up investment in European sovereign bonds in the past few years.

“European yields are low in absolute terms. And after we’ve been buying them in the last few years, our exposure has become considerable. So it’s not that we are not going to buy them but our focus is more on credit products,” said Ryosuke Fukushima, general manager of investment planning.

The insurer also plans to expand investment in alternative assets, such as hedge funds, private equity, infrastructure finance and real estates.

Its investment in properties through funds could start as early as this quarter, Haruna said.

Kampo plans to reduce its holding of domestic bonds in the year to March 2018.

But officials said Japanese government bonds look less unattractive now compared with last year, as their yields recovered substantially last year as the Bank of Japan introduced a new policy framework in September.

Kampo expects the 10-year JGB yield to rise to 0.200 percent compared with around 0.020 percent now.

$1 = 111.23 yen Reporting by Hideyuki Sano; Editing by Chang-Ran Kim and Christopher Cushing

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