Mizuho Global Alternative Investments Ltd., which introduces hedge funds to Japanese investors, expects assets to reach $2 billion by the end of the business year, reflecting demand from local pensions.
The unit of Japan’s third-largest bank by market value raised $1.7 billion by the end June that it placed with global alternative asset managers that offer funds that invest in bank loans and multistrategy hedge funds, Chief Executive Office Manabu Ando said in an interview in Tokyo. It plans to offer other alternative investments such as private-equity and infrastructure funds by the end of this fiscal year in March 2014, he said.
Mizuho Global Alternative is seeking to meet demand from Japan’s corporate pensions that need to fund rising payouts in an aging society amid the prospect of rising bond yields as the Bank of Japan pushes to achieve 2 percent inflation within two years. Of the 80 trillion yen ($800 billion) managed by the country’s corporate pensions, about 2 trillion yen to 3 trillion yen could flow into assets including hedge funds in the current fiscal year, according to Daiwa Institute of Research Ltd.
“We’re seeing growing appetite for yield-seeking products,” Chief Investment Officer Shin Kubo said in the same interview on July 23. “We’re starting to face a turning point in the direction of bond yields, so demand for investments that can withstand rising bond yields is growing.”
Japanese pensions total $3.72 trillion, the world’s largest pool of retirement assets after the U.S., according to Towers Watson & Co. (TW) Gains in stock prices helped about 120 Japanese pension funds surveyed by Towers Watson to post a 2.3 percent return in the three months ended June.
Mizuho Global Alternative currently offers about seven funds targeting mostly Japanese corporate pensions, Ando said. It continues to focus on funds with more than two years of track record and with assets under management of more than $500 million, he said.
Risk-parity funds, which allocate money to different asset classes based on the types of risks they face under different economic environments, have become popular, Ando said.
Mizuho, an affiliate of Mizuho Financial Group Inc. (8411), is also looking to start an advisory business to help pensions decide on their asset allocations, Ando said. To meet the expected increase in demand, the company is seeking to increase its staff to about 25 to 30 from the current 20 over the next two to three years, he said.
“Investors are becoming more selective and looking for quality brand,” Ando said. “That means the pace of asset growth may taper, but those who can find quality investments will remain the winners in the industry.”
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