October 26, 2017 / 7:39 AM / 2 months ago

UPDATE 1-Japan Post Insurance to increase FX-hedged foreign bonds in Oct-Mar

* To keep holdings of stocks, but to increase ratio of in-house investment

* Plans to start investing in PE, infrastructure equity assets

* To increase alternative investment to 1 pct of total asset in 3-5 yrs (Adds comments and detail)

By Tomo Uetake

TOKYO, Oct 26 (Reuters) - Japan Post Insurance Co plans to increase its holdings of currency-hedged foreign bonds in the six months through March 2018 while keeping investment without such hedging steady, investment planning officials said on Thursday.

The firm, popularly known as Kampo, also plans to increase alternative assets, with a target of raising their holdings to 1 percent of the total in three to five years, Shigeaki Asai, senior general manager of the Investment Planning Department, told a news conference.

The insurance arm of formerly state-owned conglomerate Japan Post Holdings plans to increase investment in foreign bonds, just like many private Japanese insurers, as domestic bond yields remain low.

But unlike some of its rivals that are planning to reduce currency hedging due to soaring costs, Kampo aims to increase the currency-hedged portion of investment, officials said.

“We think the yen is likely to weaken on the whole, but we do not expect it to fall to around 125 yen to the dollar like it did two years ago,” said Ryosuke Fukushima, general manager of the Investment Planning Department.

“We are taking a cautious view on currencies. But if the yen temporarily strengthens, we will flexibly use that opportunity to increase unhedged bonds.”

In the first half of the business year that ended in September, the firm reduced its holdings of unhedged foreign bonds slightly, officials said.

Kampo plans to buy mortgaged-backed securities and other credit products to enhance returns and offset a part of rising hedging costs, they said.

The firm is looking to increase the holdings of alternative investment in the second half, they added.

It plans to start investment in private-equity and infrastructure-equity funds, both in Japan and abroad. It could also start investing in foreign properties through funds as well, they added.

It started investment in hedge funds earlier this year and could increase allocations to some of them based on their performance, they said.

Kampo now plans to gradually increase the holdings of alternative assets to 1 percent of its total assets, currently at around 80 trillion yen ($704 billion), in three to five years, they said.

The company expects alternative assets, with that amount of allocation, will contribute 4 to 5 percent of the total return.

Kampo also increased the holdings of stocks in April-September, but in the current half of the year it plans to keep the holdings steady, they said.

But it plans to increase the portion of direct investment in domestic stocks while reducing allocation to outside managers. ($1 = 113.60 yen) (Reporting by Tomo Uetake; Editing by Chang-Ran Kim and Subhranshu Sahu)

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