Nissay Asset Ramps Up Hiring as Alternative Investment Booms

(Bloomberg) — The asset management arm of Japan’s largest insurer will expand its team managing private equity and other alternative investments, betting on more strong growth in the market.

Nissay Asset Management Corp. plans to hire five to seven people to oversee assets such as private equity and infrastructure finance, said Kaoru Onishi, head of the global product division. It has about 30 employees now in its alternative investment business.

“It is an expanding field. We need more people,” said Onishi, whose firm manages more than ¥2.5 trillion ($17 billion) of clients’ funds parked in alternative assets. “But there are not so many who are experienced in the field, so we think they can build up speciality” after they are hired, she said in an interview.

Japanese asset managers are trying to boost returns at a time when policymakers are encouraging households to shift their savings to investments, and alternative assets are one vehicle to help achieve those goals. There’s been strong investor demand globally for the riskier products, with assets under management expected to climb to more than $29 trillion by 2029, according to data analytics firm Preqin.     

Onishi has been with the Nippon Life Insurance Co. group for nearly three decades, and worked in New York from 2002 to 2005 to help set up the insurer’s private equity operations.

Twenty years later, Onishi is of the view that alternative assets will still attract buyers in Japan even as local interest rates rise. That may push up returns on government bonds and other traditional assets, but investors are likely to allocate a certain amount of money to alternative products as they seek to diversify their portfolios, she said.

The Bank of Japan raised interest rates in March 2024 to end eight years of radical monetary stimulus, and has lifted rates two more times since then to 0.5%. The nation’s benchmark 10-year government bond yield has almost doubled to about 1.44% during that period.

Onishi’s firm is also focusing more on private debt, she said. Those are loans provided by non-bank institutions such as investment funds, typically to smaller, riskier companies. Given that they are floating-rate products, the debt offers protection against swings in currency-hedging costs for Japanese investors putting their funds in overseas assets, she said.

Alternative assets have traditionally been the realm of institutional investors such as pension funds and insurers, but Onishi said the global trend is to make the asset class available to retail investors.

The assets carry risks that differ from stocks and bonds: they tend to tie up investor money longer than publicly traded financial instruments, and holders can’t readily cash out of them like securities. Onishi said her company is extra careful in examining managers of outside funds that hold these assets.

Alternative investments have mostly come from overseas, but Onishi said the potential for private equity in Japan is strong. That’s partly because structural changes are taking place in the country’s corporate sector, including a push to improve governance. Many small- and mid-sized companies can be targets as an aging and shrinking population creates demand to find younger executives to inherit businesses.

Nissay Asset is in fact preparing to launch a fund for overseas institutional clients that’s focused on Japan’s private equity. It’s tapping pension funds and sovereign wealth managers. Onishi is keen to start the initial fund with about $500 million and could roll out more if demand remains strong.

“I think private equity will become large. There are many deals with good investment returns, given Japan’s relatively low valuation,” she said. 

–With assistance from Umesh Desai.

More stories like this are available on bloomberg.com