Japan’s top insurers seek to increase PE exposure
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Nippon Life Insurance, the country's biggest private insurer, plans to increase risk assets such as foreign bonds without currency hedge this fiscal year through March 2020, expecting a pickup in the global economy later this year, officials said.

But Dai-ichi Life Insurance, a core company of Dai-ichi Life Holdings, the country's second-biggest, takes a more cautious stance, seeing the possibility of the U.S. economy entering a recession next year.

The two firms collectively manage about 100 trillion yen ($894 billion) and have been big buyers of foreign assets in recent years as returns on domestic bonds, which used to be their mainstay, have evaporated due to the Bank of Japan's aggressive monetary easing.

Both companies face the same challenges: persistently low yields at home, broad declines in global bond yields and elevated costs of currency hedging for dollar assets.

All of which mean they need to take bigger risks they have loathed traditionally, such as currency risks and duration risks, to maintain returns.

Japanese insurers have been wary of currency risks as the yen tends to be treated as a safe-haven and rises when the global economy gets uncertain, most notably after the global financial crisis a decade ago.

Nippon Life officials said the firm, also known as Nissay, is likely to step up investment in foreign bonds without currency hedge in the current financial.

"We could increase the holdings in the tune of a few hundred billion yens this year, though we cannot give the exact figure at this point," Shinichi Okamoto, senior general manager of investment planning, told a news conference on Monday.

Nissay increased the holdings of such foreign bonds, without currency hedge, by 830 billion yen to 5.32 trillion yen in the previous financial year ended on March 31.

But officials at Dai-ichi Life, who held a separate news conference, said they were more cautious about the global economic outlook.

The firm is wary of a U.S. recession down the road after an inversion of the U.S. yield curve - historically a signal of recession about 15 months ahead - Akifumi Kai, general manager of investment planning, told reporters.

Global share prices are likely to be supported for now by dovish turn of the U.S. Federal Reserve and China's stimulus but markets could become volatile in the second half of the current fiscal year, he said.

While Dai-ichi officials just said their investment on foreign bonds depend on market conditions, they also said the firm sees the dollar moving between 100 and 114 yen this business year, compared with 111.90 yen on Monday.

That suggests they see limited room for dollar to gain at current levels.

One of the few asset classes that both insurers plan to increase is alternative assets, such as private equity, infrastructure and real estate. They are seen as one of the last areas where decent yields remain.

"We're ready to take liquidity risk to achieve higher returns," said Nippon Life's Okamoto.

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