Specific-asset vehicles among 2023 strategy for Kewpie Pension Fund

With unstable markets and a relatively low yen, the Japanese corporate pension fund faces plenty of challenges — but a multi-pronged investment strategy for next year is taking form.
Specific-asset vehicles among 2023 strategy for Kewpie Pension Fund

As inflation, rising interest rates, and the war in Ukraine continue to create turmoil in markets, Japanese asset owners like corporate retirement fund Kewpie Pension Fund can add the pain of a struggling Japanese yen to the mix when they look at the global investment landscape in 2023. 

Kosuke Okimori,
Kewpie Pension Fund

Kosuke Okimori, the fund’s managing director at Kewpie Pension Fund, has his work cut out for him — and alternative open-end illiquid funds, keeping hedging costs down, as well as sticking with asset-specific vehicles are all part of his 2023 strategy. 

Okimori manages two funds with assets under management (AUM) of around ¥70 billion ($471 million). For the financial year ending May 2022, the two funds had an annual return of 2.2% and 1.9%, respectively — against a target return of 3.5% gross and 3% net.

Also read: Domestic bias helps Japan's Kewpie Pension Fund weather the storm


For now, Okimori has two focus areas for next year. The first is alternative investments into open-end illiquid funds within real estate and infrastructure equity, which will help to create cash flows. The plan is to invest in one to three funds with a 3-5% return target.

“We have not found any of these open-end funds within the Japanese market, so we are looking to Europe and the US. We will also continue to invest in closed-end funds within alternatives,” Okimori said.

The second focus area is to keep hedging costs down, as the Japanese yen continues to depreciate against the US dollar. On November 9, 2021, one US dollar cost ¥112.87. On November 8, 2022, the same US dollar cost ¥146.36, an increase of 29.7%.

The US dollar/yen development over the last 12 months.


Debt levels in Japan are a key issue for the government, and Okimori doesn’t believe that the Bank of Japan will raise interest rates anytime soon. This dovish, low-interest rate approach will likely mean that the yen will persist with its relatively low value.

“Now, the cost for hedging is 3-400 basis points, and that creates negative returns in some cases. Kewpie Corporate Pension aims for around 3% returns from fixed income, but that is being eaten by the hedging costs,” Okimori said.


Within equities, Okimori worries that 2023 will continue to show bearish markets, even with occasional, unforeseen shocks. Because of this outlook, Kewpie Pension Fund will target defensive, traditional industries with strong cash flows, with a general focus on value stocks.

“We target industries that will be able to absorb some of the inflation, so we especially look at sectors like food, medical, and manufacturing. Anything related to retail consumption could be good,” Okimori said.

Okimori is ruling out multi-asset class investments as a diversification factor, since he believes Kewpie Pension Fund is big enough to choose asset-specific vehicles. As opposed to hedge funds, he does not believe multi-asset would bring anything extra to the portfolio.

“Multi-asset does not always perform as expected. Like hedge funds, there is uncertainty over time. Hedge funds can show extraordinary performance some years, and that makes them attractive. But we need to be very selective,” Okimori said.

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