Japan. An Unconventional Pension Fund Bets on Volatility’s Return
A small Japanese pension fund known for its aggressive bets on alternative investments is changing tack.
The West Japan Machinery Pension Fund has an unconventional strategy with 90% of assets invested in the likes of loans and private equity. While still committed to alternatives and disavowing sovereign bonds, it has been pivoting away from low-liquidity assets such as PE and infrastructure debt, said chief investment officer Yoshisuke Kiguchi.
“Instead, we have recently increased convertible bond arbitrage quite a lot because volatility is rising,” 55-year old Kiguchi said via phone from Matsuyama, western Japan. “We’re also boosting the weighting of multi-strategy funds that include long/short in stocks and some distressed assets.”
While small — the fund oversees 20 billion yen ($189 million) — West Japan Machinery has led Japanese private pensions in going out of the way to generate returns in a low-yield environment.
The changes Kiguchi, formerly from Sumitomo Life Insurance Co., are executing reflect one extreme of how pensions are navigating the investing landscape as the pandemic forces a rethink.
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