Japan’s biggest life insurer is considering taking on a little more risk with its investments in collateralized loan obligations (CLOs), as it looks for ways to eke out better returns abroad.
Nippon Life Insurance last year joined other Japanese institutions that are buying CLOs — financial products made up of leveraged corporate loans — to diversify investments. They have typically focused on the highest-rated notes, which are seen as the least risky but offer lower returns.
“There could be a situation where we cannot secure enough spreads with the triple A-rated tranche,” Nippon Life Chief Investment Officer Keisuke Kawasaki said in an interview. “If that happens, we’re thinking about enhancing the yields by including some double A-rated ones.”