Dai-ichi Life Holdings, one of Japan’s largest institutional investors, is shifting more money to domestic bonds from Treasury and other foreign securities, after aggressive interest rate increases by the Federal Reserve made it costly to hedge against currency risks.
"Assuming a certain level of the interest rate gap to remain, I think it’s difficult to increase hedged foreign bond investment. So basically, they are to be reduced,” Tetsuya Kikuta, the firm’s incoming president, said in an interview, referring to the difference between U.S. and Japan short-term rates that affects hedging costs.
The nation’s largest listed life insurer is increasing investments in superlong Japanese government bonds like 30-year and 40-year notes to match the duration of its liabilities, which are made up of insurance policies spanning decades, according to Kikuta, the firm’s current chief financial officer who’s set to take on his new role on April 1. Dai-ichi’s core unit manages a portfolio worth about ¥33.9 trillion ($260 billion).