TOKYO -- Japan's Mizuho Bank and Dai-ichi Life Insurance will create the country's first-ever fund for investing in debt linked to overseas infrastructure projects.
The pair envision around 100 billion yen ($954 million) in commitments to the fund, with the initial 10 billion yen coming from Dai-ichi Life.
The fund will operate for about 20 years, with an anticipated return of around 2%. It will hold loan receivables for financing issued mainly by the Mizuho Financial Group lender for projects in areas such as power plants and liquefied natural gas. Mizuho Global Alternative Investments will handle daily management.
Many infrastructure funds hold equity in special-purpose companies that operate the underlying projects. Investing in infrastructure-linked debt promises lower yields, but also less risk. Mizuho and Dai-ichi Life anticipate demand from investors seeking stable, long-term income amid scant opportunities for decent returns.
Financing infrastructure piles up long-lived risk assets on the books of big banks like Mizuho, potentially requiring them to increase their capital buffers. Offloading such loans into investment funds helps boost capital efficiency.