<article>Japanese investment banking giant <a href="https://www.dealstreetasia.com/?s=Japan%20Post Bank">Japan Post Bank</a> is looking at raising its private equity (PE) investments to over ¥2 trillion ($18 billion) in the next three years, from the current ¥500 billion ($4.5 billion).</article>

Japanese investment banking giant <a href="https://www.dealstreetasia.com/?s=Japan%20Post Bank">Japan Post Bank</a> is looking at raising its private equity (PE) investments to over ¥2 trillion ($18 billion) in the next three years, from the current ¥500 billion ($4.5 billion).
PE investments form a major part of Japan Post&#8217;s overall plan of increasing the size of its alternatives and real estate portfolio to ¥8.5 billion ($76 billion) by the end of the fiscal year 2021, from just ¥1.6 billion ($14 billion) in 2018.
According to its Medium-Term Management Plan, the bank said it aims to acquire private equity investment opportunities through a joint investment company. It plans to expand its LP investments as well as participate in GP operations.
The bank will also &#8220;support the management of portfolio companies through the supply of equity funds&#8221;. Aside from raising its exposure to private equity, the bank is also looking to up its real estate and hedge funds investments.
Early this year, the bank said it would set up a PE fund management company with up to $1.1 billion in an initial fund. The move comes as the bank, a unit of Japan Post Holdings Co, seeks higher-return assets in its investment portfolio.
The bank plans to increase its exposure to risk assets &#8212; which includes alternatives such as PE, credit, foreign government bonds and equities &#8212; to 45 per cent of its overall portfolio, from the current 40 per cent, while cutting exposure to Japanese local government bonds (JGBs) and yen interest rates to 55 per cent from the current 61 per cent.
“The earnings from JGBs, etc, that accounted for a large portion of revenues initially after privatization are in significant decline due to the decrease in interest rates,” the bank explained its decision to raise exposure to risk assets.
Japan Post Bank, which manages about ¥200 trillion ($1.8 trillion) in investment assets, faces diminishing returns amid persistently low-interest rate.
Japan Post Bank admits that its capital adequacy ratio will decline with the increase in risk assets. However, it assured that the capital adequacy ratio will be maintained at a level that can reassure and obtain the trust of customers and shareholders.
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Japan Post Bank plans to increase the size of its alternatives and real estate portfolio to ¥8.5 billion ($76 billion) by the end of the fiscal year 2021, from just ¥1.6 billion ($14 billion).

Japan Post Bank to increase PE investments to over $18b by 2021

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