AXA Life Insurance (Japan), with over USD14 billion in assets, is planning to begin buying credit-default swaps for its investment portfolio for the first time. "We're now putting together our strategic allocation plan," said Moriyuki Ito, head of asset and liability management in Tokyo. The insurer is looking to increase investments in fund-of-fund products as well as begin buying five-year protection on U.S. and European names. "We hope that CDS spreads will [widen] in the next two-to-three years," said Ito, noting that the firm will then look to unwind its positions at a profit. Ito continued that due to the tightness of spreads on domestic default-swaps it will focus on familiar names from other markets. AXA will likely begin trading CDS after it completes its investment plan, which is expected in July.
CDS positions could account for up to 30% of the total size of AXA's fixed income portfolio, Ito said, declining to comment on the value of the portfolio. The insurer has also bought over 10 synthetic collateralized debt obligation tranches (DW, 3/17) but Ito noted the firm will maintain its portfolio and focus more on buying credit protection rather than enter additional CDO transactions.
AXA will enter derivative positions via its investment management arm, AXA Investment Managers and Alliance Capital.
