Exclusive: Japan’s DIC Pension forming infra debt strategy

The $1bn corporate pension sees infrastructure debt as a fixed income product.

DIC Pension Fund is putting together strategies to target fixed income and alternative debt instruments including infrastructure, real estate and corporate debt, according to a senior executive at the institution.   

Hideo Kondo, DIC Pension Fund’s asset management director, told Infrastructure Investor in an interview in Tokyo that the pension considered infrastructure debt as a fixed income investment product, owing to the “good quality” of the assets. As a result, he explained, the pension does not consider allocations to such assets as alternative investments. 

“With bank regulation increasingly tight in the US, we see lending opportunities for institutional investors like us as a debt investor,” added Kondo. 

He said the pension’s efforts to develop debt strategies comes after it spent several years designing investment criteria for deploying capital into alternative equity. 

Kondo deemed open-ended funds particularly attractive due to their higher liquidity and low leverage, which he said brought them very close to listed equities. 

The Tokyo-based corporate pension was one of the first Japanese institutional investors to build an alternative investment portfolio, starting a dedicated programme in the early 2000s. DIC Pension made its first infrastructure investment in 2004, when it backed a UK social infrastructure project. 

Its current infrastructure equity portfolio stands at 5 percent of its $1 billion assets under management, with another 2 percent invested in real estate. 

Half of its alternatives portfolio comprises income-generating core assets, while the rest is made up of growth and opportunistic holdings focused on capital gains. The pension has a 17 percent allocation to private equity and infrastructure.