Tokyo Summit: Japanese LPs are ready to go beyond core

Investors are looking at value-add and infra-like strategies, as they look to diversify across geographies, vintages and managers.

Now that Japanese investors have built an initial portfolio focused on core infrastructure, they are looking for new strategies and ways to diversify their exposure to the asset class.

“Although we want to make sure that the income level is stable, we are trying to invest in diverse strategies such as value-add,” Hisamitsu Iida, private assets portfolio manager at Sompo Japan Nipponkoa Insurance, said during a panel discussion at Infrastructure Investor’s Tokyo Summit on 9 May. “If an investment is stable enough, we are ready for it,” he added.

But Sompo Japan Nipponkoa is also willing to invest with new managers in search of that diversification.

“Regardless of whether our previous managers did well or not, we try to work with different managers,” he said.

Japan Post Bank, one of the leading infrastructure institutional investors in the country, is also looking for greater diversification by exploring infrastructure-like opportunities, as long as their underlying characteristics are similar.

“We try to make investments that go beyond the conventional infrastructure investment, and we are ready to invest in new areas like agriculture,” Yasuhiro Ono, director of private equity and infrastructure at Japan Post Bank, said.

“If there’s a stable demand, and a long-term contract with the offtaker, we see this is as a new area of infrastructure investment,” he added.

The panellists stressed that, at the moment, their main concern is to diversify their exposure to the asset class.

“We focus on diversifying our regional, vintage and sector exposure. We also believe that we should diversify our approach to investment, and we are making efforts to participate in co-investment opportunities,” Ono said.

On-site visits

Investors also stressed that they like to visit the asset to better understand their investments.

“Sometimes we don’t know which kind of exposure we are getting,” Iida commented.

“It’s important for us to visit the assets and understand the risks associated [with them], and that the risk level is not too high,” he added.

Similarly, the head of infrastructure and income investments at Japan’s Pension Fund Association, Satoru Tanabe, explained that he also considers on-site visits fundamental due to the “limited information” offered by fund managers.

“It is an issue of better accountability, and it helps us to convince the senior management to get approval for the investment,” he said.