Japan Post Bank Co., a Tokyo-based giant with a $1.9 trillion investment portfolio, reversed course earlier this year on a planned boost in hedge fund allocations while halving the bank's broader targets for alternative investments.
Industry veterans say the bank has begun drawing down the more than ¥1 trillion ($9.3 billion) of allocations it made over the past three years to hedge fund-of-funds strategies managed by industry heavyweights, including Blackstone Group Inc., Goldman Sachs Asset Management Co. Ltd. and UBS Asset Management.
Spokesmen for the three managers declined to comment.
"We still have hedge funds as of June 30, 2019," and they remain one of the bank's "strategic investment areas," a Japan Post Bank spokesman said in an email.
The spokesman went on to suggest that too much shouldn't be read into the fact that Japan Post Bank's last two quarterly earnings reports and its latest annual report dropped "hedge funds" from its list of higher-risk "strategic investment areas" at the center of the bank's efforts to boost the level of sophistication of its portfolio management.
That list — through the end of 2018 — read "private equity funds, hedge funds and real estate funds (equity), real estate funds (debt) and direct lending funds."
Hedge funds are still included under "etc.," said the spokesman. The other alternative strategies are still listed under strategic areas.
Meanwhile, the Tokyo-based behemoth in May said its "strategic investments" would grow to ¥4 trillion to ¥5 trillion by March 2021 — a sharp retreat from the ¥8.5 trillion target it announced 12 months before.
The recent "market environment" prompted the bank to reconsider its plans for strategic investment areas and slow the pace of allocations outlined in the bank's medium-term management plan for the three years through March 2021, the spokesman said. He didn't offer further details.
In March, at a meeting to update analysts on the bank's investment management policies, Japan Post Bank executives said the performance of their hedge fund allocations had been disappointing and the fund would "stop doing hedge funds pretty much," said Michael J. Makdad, a Tokyo-based senior equity analyst with Morningstar Inc., in an interview.
Hedge fund redemptions may explain, in part, why the bank's allocations to strategic investments — which jumped on average by more than ¥400 billion a quarter for the five quarters through the end of 2018 — have leveled off in the first half of 2019, keeping to a narrow range between ¥2.93 and ¥2.99 trillion yen.