The pension fund of DIC Corp, which manages ¥87 billion (S$1.3 billion) of assets, intends to make investment in real estate in Japan and abroad for the first time since 2006.
The retirement savings manager for approximately 6,200 employees is looking into property investing after it stopped making investments in the asset class due to the emergence of the sub-prime mortgage crisis, said Hideo Kondo, the fund’s asset management director. The plan comes after commercial land prices in Japan fell to its lowest level in 36 years.
“One of the best investment decisions we made was to exit all our real estate investments in 2006 on the view that property prices worldwide were expensive,“ said Mr. Kondo. “But now, we’re starting to see some investment opportunities in the real estate market.”
DIC Corp’s pension fund currently invests 55 percent of its assets in domestic bonds and the rest in overseas and domestic equities, he said.
Japanese pension plans are adjusting their investments following two decades of declining markets, a dependency on retirement packages that are immune to investment performance, and an ageing population.
Around 37 percent of Japanese pensions polled by JPMorgan Chase & Co said they anticipate to improve allocations to alternative investments.
Real estate falls under alternative investments, which currently make up around 16 percent of the company’s portfolio, said Mr. Kondo.
Under the category, the pension also invests in private equity, focusing in emerging markets and in Asia, as well as in infrastructure in developed markets, including the UK and the US, he added.
DIC pension has invested mainly in single-manager hedge funds abroad, with strategies such as long-short to hedge against equity holdings, said Mr. Kondo. The pension has also investments in a macro strategy as a hedge against bond investments.
“When you think about diversifying your investments, you’ve got to use hedge funds,” said Mr. Kondo. ”Otherwise, it’s difficult to achieve your targeted returns.” The fund of DIC targets a yearly return of 3.5 percent.