Japan’s ORIX to treble alternatives exposure to 10% after hiring spree – Exclusive

Three investment executives from the country’s Government Pension Investment Fund have joined the life insurance company in recent months, prompting the insurer to increase its allocation from 3 to 10 percent.

ORIX Life Insurance Corporation, the Tokyo-based life insurance company, and an affiliate of Japanese financial services group ORIX Corporation, has geared up to expand its alternatives investment platform, PERE can reveal.

ORIX declined to disclose its target allocation but it is understood the company, which has ¥1.9 trillion ($17.5 billion; €15.7 billion) in assets, is planning to increase its alternatives allocation from 3 percent to 10 percent of its total investment portfolio in the next five years, according to two sources with knowledge of the matter.

A third source also told PERE that real estate is expected to take up around half of its alternatives allocation. The alternatives bucket includes real estate, private equity, private debt and infrastructure.

The insurer is in the process of building up its alternative platform. Since April this year, it has hired three investment executives from Government Pension Investment Fund, the world’s largest pension fund with total assets under management of ¥158.6 trillion. The team has subsequently grown from four people to seven.

Kiyosei Sugioka was hired from GPIF to lead the team in April as head of alternatives investments. Sugioka had been with GPIF for more than five years and was most recently the team’s global portfolio manager for real assets, according to Linkedin. This month, Keisuke Okano and Noriko Hayashi also joined the team from GPIF to look after infrastructure and private equity investments respectively, according to Linkedin. They had been with GPIF for eight and six years respectively.

ORIX currently has 3 percent of its portfolio invested in domestic real estate with the remainder in fixed income, according to a previous report by PERE. It is also understood that the firm will start by looking at real estate and private equity investments first and then gradually expand its allocation to other asset classes.

Expanding its alternatives platform aligns with the insurer’s focus to diversify its investment portfolio, according to the same PERE report. By looking for growth in the private market and growths out of Japan, the insurer hopes to generate a higher and more sustainable growth.

For overseas real estate, the firm prefers funds with smaller exposure in the retail sector because it has been adversely affected by the growth of e-commerce. Sugioka also mentioned that he would invest in markets with established legal systems, such as Australia, Europe and North America. These would be accessed via commingled funds.