Asahi Mutual Life Insurance, with over USD58 billion in assets, is considering ramping up its synthetic collateralized debt obligation investment portfolio as well as increasing its purchases of credit-linked instruments. "We're focusing on the credit derivatives market," said Manabu Tamaru, head of the credit investment department in Tokyo.
The insurer will likely buy two or three tranches of static synthetic CDOs in the next six months when the market settles from the impact of the war in Iraq. The tranches will be mezzanine risk, rated BB or BBB, according to Tamaru. Asahi currently holds four CDO portfolios, some of which hold international credits. Tamaru declined to comment on the size of the portfolio or the size of potential CDO investments.
Asahi will look exclusively at domestic credit products because of uncertainty in the global credit markets, largely due to the war in Iraq and the decline in credit quality of U.S. corporates.
In addition to CDOs, the Fortune Global 500 insurer is planning to increase its investments in single-name credit-linked notes, but is staying away from the more esoteric credit products. "The simpler the better," he added. Tamaru declined to comment on potential investment sizes. He continued that he is currently speaking with several derivative shops in regard to credit derivatives, but declined to name them. Pricing, reporting systems and quality of research are factors Asahi considers when selecting counterparties.