Japan’s biggest bank plans to bet $9bn on riskier asset push

Bloomberg

Japan’s biggest bank is planning to plow about $9 billion into a new investment team that will look to buy credit, equities and alternative assets in a bid to lift investment returns.
Mitsubishi UFJ Financial Group Inc expects to begin buying the assets in the second half of this year that will likely focus on US securities, said the group’s head, Yoshiaki Nemoto. His team will manage a new investment account, separate from the bank’s conventional securities portfolio, and will aim to grow assets to about $9.1 billion within three years, he said.
“We need to consider ways to boost returns,” Nemoto said in an interview, as low global interest rates endure at the same time as a hefty surplus of bank deposits.
Other banks in Japan have signalled efforts to seek higher-yielding assets as lenders face a sharp build-up in excess cash amid the pandemic. MUFG’s move is among the largest and may bring with it scrutiny from investors.
The new investment plan that “will surely carry higher risk weights raises concern over whether it could affect the group’s ability to boost future dividend payouts significantly,” said Michael Makdad, an
analyst at Morningstar Inc.
Nemoto said his team emphasises diversification, and considers buying assets such as real estate investment trusts in addition to equity and corporate bond funds. He said while portfolio will be geographically varied, the US is likely to make up a large portion given its
relatively bigger market size.
The team, which was set up in April, currently has a staff of seven but that will likely grow and Nemoto said he may look to recruit from outside his firm in the future. MUFG is trying to design a new account that can make longer-term investments than the bank’s traditional portfolio management, which is constrained by short-term flows. The bank said the account
size is likely to expand beyond
1 trillion yen in years ahead.
Nemoto said risk control is critical for the team and that’s why the buildup in assets will be a slow process at the beginning. “It’s not easy,” he said. “There are attractive assets, but we will make investments after doing due diligence and building a solid risk
management system.”
MUFG shares slipped 1.9% as of 10:28 am in Tokyo, while the Topix index of Japanese equities dipped 0.1%.