JAPAN - Mizuho Global Alternative Investments aims to raise ¥100bn ($1.2bn) in three years after starting this month to help Japanese pensions invest in hedge funds.
The firm, a wholly owned unit of Mizuho Corporate Bank Ltd., began on October 5 to provide alternative investment products such as hedge funds to Japan's corporate pensions and institutional investors, said Akira Muto, chief executive officer of the Tokyo-based firm.
In five years, the company aims to increase its assets from clients to ¥200bn by introducing overseas hedge funds, he said.
Mizuho Global Alternative is trying to tap growing demand from the nation's more than ¥60trn corporate pension market. Funds are seeking to diversify investments away from traditional asset classes such as bonds and equities after years of underperforming stocks and low government bond yields.
"Traditional assets alone aren't enough to achieve returns," Muto said. "We realised the need to introduce alternative investments around the world to Japanese investors."
The unit is the second established by Mizuho Corporate, the corporate banking unit of Japan's second-biggest publicly traded lender, dedicated to providing alternative investments.
In 2007, Mizuho Corporate set up Mizuho Alternative Investments based in New York, whose flagship Crystal Japan fund has returned an average 9% a year since inception in 1997. The fund is a so-called commodity trading adviser, or CTA, which uses computer programmes to search for price signals in futures markets ranging from equities to oil and gold.
After screening about 1,000 hedge funds in the US, the newly established unit has selected two that it can introduce to Japanese clients "with confidence" once it conducts due diligence, Muto said.
Initially, the firm will be looking at US and European single-manager funds to cater to Japanese investors who seek to scrap a bias toward domestic investments, he said.
Japanese pension funds are seeking reliable returns as retirees tap their benefits in a nation where the average lifespan reached a record last year. They have also been hurt by low bond yields, a declining birthrate and two decades of slumping stocks that sent the benchmark Nikkei 225 Stock Average to a quarter of its 1989 peak.
The shortfall in pension funding of the nation's top 278 companies by market value rose 50% to ¥21.5trnin the year ended March, according to a study by the Tokyo-based Daiwa Institute of Research.
The likely introduction of International Financial Reporting Standards, which will require current pension losses to be posted on a company's balance sheet instead of being spread out over a longer period, is also pressuring clients to seek ways of providing more stable returns, Muto said.
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