Japan's Tokio Marine & Fire Insurance Co. is looking to expand its credit derivatives portfolio in the coming months by investing up to USD1.5 billion in synthetic collateralized debt obligations. "We have an appetite for senior and high-rated portions," said Manabu Yukitomo, deputy manager in Tokyo. It is likely the insurer will invest in at least three transactions for its USD5 billion fixed-income portfolio before year-end. The insurer tested the water for CDOs earlier this year, but is now looking to start in earnest. "CDOs will allow us to diversify our exposure," he added.
The insurer is speaking to a number of firms about CDOs, including BNP Paribas, Deutsche Bank and JPMorgan. "It's becoming really competitive," said Yukitomo, noting that more and more houses in Japan are offering the instruments. Atsuko Yoshitsugu, spokeswoman at JPMorgan, and Seiko Adachi, spokeswoman at Deutsche Bank, declined comment. Yoko Shiomi, spokeswoman at BNP, did not return calls.
Tokio Marine will look to invest around USD100-500 million per transaction, depending on the risk profile. Yukitomo noted that the company will look to invest in yen-denominated notes to avoid exchange risk and will consider structures that incorporate Japanese as well as U.S. and European credits.
"We don't trust the ability of managers," added Yukitomo, noting that the fund will steer away from managed portfolios and invest in static portfolios.
