Shinsei Bank Ltd. joined with Invesco Ltd., the U.S. owner of Van Kampen and PowerShares funds, to sell a North American bank-loan fund targeting local Japanese lenders who are cutting reliance on domestic government debt.
The fund opened Sept. 30 and invests mainly in floating-rate bank loans made to U.S. and Canadian firms, Akira Oishi, general manager of promotion at Tokyo-based Shinsei's asset management business, said recently. Shinsei and Invesco expect a 3 percent investor return after commission fees and plan to expand the fund to ¥10 billion in assets, he said, without giving a time frame.
The Shinsei Invesco Bank Loan Fund follows the Japanese lender's tie-up with Russell Investments Ltd. in January to form an overseas sovereign-bond fund for regional banks seeking alternatives to government debt. Local banks' JGB holdings have surged more than 60 percent over the past decade to ¥41.9 trillion in August, Bank of Japan data show, fueling concern an increase in interest rates may lead to losses.
"We're striving to offer solutions to Japan's regional financial institutions whose investment portfolio is heavily weighted on JGBs," Oishi said in an interview Wednesday. "Bank loans are expected to maintain a solid risk-return profile for the time being unless a massive credit event breaks out."
Credit ratings on loans held by the new fund are generally below investment grade and are backed by first-rate collateral to reduce risk, he said. Atlanta-based Invesco manages more than $700 billion, including the PowerShares Senior Loan Portfolio exchange-traded fund.