The following is a translation of “Survey of Private Asset Investment among Japanese Corporate Pensions” from Private Asset Managers Directory, an AL-IN Special Issue, published in spring 2020. The survey by AL-IN Asset Management Research Center in summer 2019 collected responses from 107 asset owners.

While the general appetite in Japan for private asset investments is subdued, among the portfolios of major institutional investors such as pension funds and sovereign wealth funds, private assets are a large portion of alternative investments.  Private asset investment is in its early stages in Japan, but the private market is expected to grow, particularly in infrastructure and real estate.  Rapid growth in these areas suggests that many investors are turning to private assets for greater returns and diversity.

 

Investment in Private Assets (by Fund Size)

More than 40% of corporate pensions have invested in private assets

43.9% of the asset owners surveyed said they had invested in private assets.  Roughly speaking, the larger the fund, the larger the allocation to private assets.  Among funds under JPY 10 billion, only 20% invest in private assets.  Alternative investments are subject to a ceiling, which limits the allocations of smaller funds.

 

What Do Investors Expect from Private Assets?

"Less volatility in market price"

What advantages do investors expect from a private asset strategy?  The most common answer was “less affected by market value” followed by “less correlativity with stocks and bonds” and “access to unique investment opportunities”.  Conventional assets are highly liquid but also highly volatile.  Many funds invest in private assets to insulate their portfolios from risks associated with conventional assets.