Fukoku Mutual Life Insurance Co., with JPY4.732 trillion (USD40.2 billion) in assets, is considering beefing up its synthetic collateralized debt obligation investments for its USD5 billion fixed-income portfolio in the coming months. "We just got started," said Ichiro Yamada, manager of the international finance department in Tokyo, noting that the firm recently purchased a USD10 million tranche of a synthetic CDO.
The insurer has earmarked a further USD50 million for the products this year. It will only consider tranches rated AA or higher and referenced to domestic credits, added Yamada.
The firm is also looking at using credit-default swaps to hedge a segment of its fixed income portfolio as well as possibly take credit exposure. However, he noted that it would likely take six to 12 months before it enters the market, pending further study. Yamada declined to further elaborate on credit products including its recent investment. As for counterparties, he added that the insurer does not use one bank in particular but looks favorably on firms that provide strong research. It speaks to both domestic and international banks, noted Yamada, declining to cite specific houses.
