Japan Post Bank To Establish Hedge Fund In Hunt For Yield - Global Finance Magazine

Japan Post Bank is pursuing an unprecedented diversification strategy with the launch of an in-house hedge fund targeting $1.5 billion in capital, scheduled to open in October 2018. The move signals a fundamental strategic reorientation for Japan's largest postal banking system, shifting away from the conservative investment framework that has defined the institution since its 2006 establishment. The new hedge fund office will be based in Tokyo's Otemachi financial centre, positioning the bank to execute a more sophisticated and aggressive investment mandate.

The hedge fund initiative is emblematic of a broader institutional response to Japan's monetary policy environment. The Bank of Japan's sustained ultralow interest rates and quantitative easing measures—core pillars of Prime Minister Shinzo Abe's economic agenda—have compressed yields on traditional fixed-income instruments into negative territory for shorter maturities. This yield compression has forced institutional investors, particularly those with substantial asset bases, to seek returns through alternative investment strategies and higher-risk asset classes. According to Kazuhide Tanaka, chief representative and head of long-term funding for Japan at Rabobank in Tokyo, "The dynamic of moving into previously uncharted territory by Japan's institutional investors is the direct result of the ultralow interest-rate policy and quantitative easing by the Bank of Japan."

Japan Post Bank's asset allocation strategy under Chief Investment Officer Katsunori Sago—who joined from Goldman Sachs in 2016, where he served as vice chairman for Japan—has already shifted substantially toward alternative investments over the preceding three years. The bank has been building positions in private equity, funds-of-funds, and other non-traditional instruments to enhance portfolio returns across its $1.85 trillion asset base. The hedge fund represents an acceleration of this trend, bringing specialized talent and leverage-based strategies into the bank's investment toolkit.

The management team for the new hedge fund comprises seasoned investment professionals recruited from major global financial institutions, including Goldman Sachs, Fidelity, and Barclays. Notably, the fund will have discretionary authority to execute short positions in domestic Japanese equities—a capability that represents a significant cultural and regulatory departure for Japanese institutional investing and has provoked concern among segments of Japan's local investment community, which traditionally favors long-biased strategies aligned with domestic market support objectives.