Japanese insurer Dai-ichi Life Insurance has committed JPY10 billion ($99 million; €88 million) as seed money to a JPY100 billion infrastructure debt fund managed by Mizuho Global Alternative Investments.
Dubbed “Cosmic Blue PF Trust Lily”, the debt fund will invest in overseas infrastructure project finance debt. Dai-ichi Life and Mizuho co-designed the vehicle.
“It aims to achieve long term stable income gains by investing in project finance debts which generate predictable cash flows, such as operational projects after construction period and projects secured by long-term offtake agreements,” Dai-ichi Life said in a statement, adding that a geographic focus will be on “mainly investment-grade countries”.
The fund will convert foreign currency-denominated cash flows from overseas assets into Japanese yen, with currency hedging to be arranged by bank. “By investing in the fund, investors will be able to have a diversified portfolio in overseas project finance market which is estimated to approximately JPY30 trillion per annum,” Dai-ichi Life said.
Expected to run for about 20 years, the fund will offer an anticipated return of around two percent, according to Nikkei. The report added that the fund will hold loan receivables for financing, issued mainly by the Mizuho Financial Group, linked to projects in areas such as power plants and liquefied natural gas.
Mizuho Financial Group, the parent company of Mizuho Global Alternative Investments and Mizuho Bank, may divest part of its project finance portfolio to the fund but with a “fair and objective” pricing, said an advisor Infrastructure Investor spoke to. “Japanese investors may wish to have some exposure to the loan pool that generates yield. It is denominated in yen as it targets Japanese institutional investors.”
Dai-ichi Life has been ramping up its exposure to infrastructure since 2013, and its commitments to the asset class currently total $1 billion.
Earlier this April, the insurer invested $30 million in a LNG plant project finance in the US through a new trust structure. The vehicle converts investments denominated in foreign currency into yen-denominated bonds.