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Japanese Insurers Tip Toe Further Into Hedge Funds

Nothing appears to be warming the hearts of Japanese insurers these days like hedge funds.

Nothing appears to be warming the hearts of Japanese insurers these days like hedge funds. As the always conservative country as a whole has been tip-toeing into the sector, many of Japan’s largest insurers are considering a boost in alternative investments in the face of low returns from government bonds (domestic interest rates have been hovering around zero for almost 10 years), a wobbly yen (which makes acquiring overseas debt expensive) and domestic stocks that inspire yawns, according to Reuters. On the other hand, says Reuters, insurers, having suffered from their own financial woes for years, don’t appear to have the stomach for the usual high risks associated with hedge funds, and going somewhat gingerly further into the sector. “You could say that our strategy is somewhere between middle-risk-middle return and low-risk-low return,” Hirofumi Miyahara of Sumitomo Life told Reuters. In addition to Sumitomo, other Japanese insurers that have declared a greater interest in alternatives are Dai-ichi Life and Nippon Life, the biggest alternative investor with nearly half of the total $34 billion that the top nine insurers have placed in mainly funds of hedge funds and real estate. While it may sound as if Japanese insurers are desperate to make more money, they are not so desperate as to risk losing more of it. The current $34 billion represents about 2% of their total $1.4 trillion in assets.

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