DIC Corp.’s pension fund, which manages 87 billion yen ($959 million) of assets, plans to invest in real estate at home and abroad for the first time since 2006.
The manager of retirement savings for about 6,200 employees is taking a look at real estate after it stopped investing in the asset class as the subprime mortgage crisis was emerging, said Hideo Kondo, the asset management director of the fund. The plan comes after Japan’s commercial land prices dropped to the lowest in at least 36 years.
“One of the best investment decisions we made was to exit all our real estate investments in 2006 on the view that property prices worldwide were expensive,” Kondo, 55, said in an interview in Tokyo yesterday. “But now, we’re now starting to see some investment opportunities in the real estate market.”
The pension fund of the world’s biggest ink maker currently invests 55 percent of its assets in domestic bonds and the rest in domestic and overseas equities, Kondo said.
Japanese pension plans are adjusting their investments after two decades of slumping markets, an aging population and a dependence on retirement packages immune to investment performance. About 37 percent of Japanese pensions surveyed by JPMorgan Chase & Co. said they expect to boost allocations to alternative investments.
Alternative investments, under which real estate falls, currently account for about 16 percent of the portfolio, Kondo said. In the category the pension also invests in private equity with a focus in Asia and emerging markets, as well as infrastructure in developed markets including in the U.S. and the U.K., he said.
DIC pension has invested mostly in overseas single-manager hedge funds with strategies including long-short, which bet on rising and falling stock prices, to hedge against its equity holdings, Kondo said. It also invests in a macro strategy as a hedge against its bond investments, he said.
“When you think about diversifying your investments, you’ve got to use hedge funds,” Kondo said. “Otherwise, it’s difficult to achieve your targeted returns.”
DIC’s fund targets a yearly return of 3.5 percent, he said.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.