By Tomo Uetake and Hideyuki Sano
TOKYO (Reuters) – Nippon Life Insurance Co, Japan’s largest private life insurer, plans to double its investment in foreign real estate and infrastructure by early next year, its top investment official told Reuters on Tuesday.
The move came amid growing expectation that low interest rates in Japan and other developed countries are likely to stay for a long time and therefore the insurer will need a new source of income.
Nippon Life plans to commit a total of 350 billion yen ($3.2 billion) to investments in real estate and infrastructure, mostly in North America and Europe, through funds of funds, said Kazuhide Toda, the company’s chief investment officer.
The investment would be made gradually over years, by responding to fund managers’ capital calls. The size of its investments in alternative assets was likely to about 380 billion yen by early 2021, double the level at the end of the last financial year, in March 2019, Toda said.
Like many investors in Japan and Europe, Nippon Life’s profits have been squeezed by dwindling bond yields in Japan and elsewhere.
The 10-year JGB yield stood at minus 0.04% on Tuesday, after having plunged to as low as minus 0.295% last September on fear of U.S.-China trade war.
Most European bonds also have negative yields while in the United States, now the highest-yielding among developed countries, 10-year Treasury notes yield about 1.6%, compared with more than 3.5% decade ago.
Nippon Life expects investments in the alternative assets to yield about 8% and expects to be able to afford to invest more in such illiquid assets.
On top of yield enhancement, increasing exposure to foreign real assets brings more benefits in terms of diversification, Toda said.
Partly to fund increased investment in alternative assets, Nippon Life has been expanding the use of derivatives, such as interest rates swaps and options, in its fixed income portfolio in the yen, the core of its assets.
Including group firms, Nippon Life has total assets of 81 trillion yen.
($1 = 109.70 yen)
(Additional reporting by Kazuhiko Tamaki; Editing by Robert Birsel)
Proposed Edge Fund would benefit from sharper focus, says investment manager – Taproot Edmonton
But it’s trying to do a lot at the same time, with eight criteria to align with: economic impact, job creation, connection to key industries, benefits to the innovation sector, connection to existing initiatives, social benefits, inclusive growth, and environmental goals. The funding is available to private-sector companies, not-for-profit organizations, and public institutions proposing local investments. Broadness may not serve it well, Tse said.
“Big-tent approaches get too diffuse, and we often never see the real results or the impact of it,” he said.
Phase 1, drawing $5 million from reserve funds set aside for COVID-19 recovery, would be run at the outset by city administration, working with organizations such as Edmonton Unlimited and Edmonton Global to refine the program. This will give administration “the opportunity to establish a viable internal governance structure, to assess program uptake and the success of funded projects or initiatives, as well as provide insights into how to establish a sustainable, permanent version of the program,” says the proposal.
It’s important to learn those lessons well, Tse said. “At the end of the day, what matters is, ‘Can we figure this process out that’s going to warrant more?'”
That said, Tse has concerns about the amount of money that will go to overhead. The current proposal expects a full-time equivalent salary, legal support, communications, website development, advertising, and other expenses to come out of the initial $5 million. “That’s a not insignificant amount of money that’s going to evaporate in operating costs.”
The Edge Fund is one of many budget requests that city council is considering as it prepares to set its operating, capital, and utility budgets for 2023-26. Two days of public hearings began on Nov. 28, and the first budget meeting is scheduled for Nov. 30.
Top Investing Trends For 2023 – Forbes Advisor
What a difference a year makes.
At the beginning of 2022, prices were spiking higher in the U.S. thanks to pandemic supply chain breakdowns and consumer bank accounts stuffed with cash. Remote work seemed here to stay and unemployment was near all-time lows. For many, there was a real sense that the pandemic economic crisis was behind us.
Not every observer was so sanguine, however, and it didn’t take long for runaway inflation to become a major headache for markets and regular Americans.
After some hesitation (remember transient inflation) the Federal Reserve pledged to crush rising prices by hiking interest rates. The stock market tanked, taking bonds along for the ride, making it a miserable year for investors.
With 2022 drawing to a close, the S&P 500 has clawed its way out of bear market territory but remains down 17% as of this writing. As we look ahead to 2023, here are nine investing trends that can help parse the cautionary tales from the opportunities.
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1. America Remains an Inflation Nation
Inflation was the economic glitter of 2022—it stuck to everything. From the gas pump to the grocery store to your 401(k), investors have higher costs and less valuable dollars to invest in the future.
The big question for 2023 is whether inflation will drop toward the Fed’s 2% target rate. Many experts suggest that’s unlikely, although it’s worth noting that the Fed’s six 2022 rate hikes will take a while to work their way through the economy.
Morningstar predicts that the Fed will ease monetary policy and lower interest rates to roughly 3% by the end of 2023. If that happens, it won’t help the inflation fight. That suggests that Treasury Inflation Protected Securities (TIPS) and I bonds should remain popular inflation-fighting investments.
2. The Bear Market Could Stick Around
The Covid-19 stock market rocketship crashed and burned. June 2022 ushered in the second bear market since 2020, sending investors scrambling for cover.
While stocks have officially emerged from the bear market in the second half of 2022, stock markets remain down by double-digits.
Ordinarily, bonds would take the edge off a bear market. However, aggressive interest rate hikes have bond yields falling along with stock prices. In the third quarter of 2022, the venerable 60/40 portfolio suffered greater losses than its stocks-only counterpart, causing questions about whether the O.G. portfolio needs to go.
Improving investor sentiment will likely be tied to easing inflation, so the year ahead could prove tricky for traditional asset allocation models.
While putting a “buy low” mantra into heavy rotation on your morning meditation playlist is never a bad idea, 2023 may prove that buy-and-hold investors need more than equities and fixed income to hedge against unpredictable markets.
3. Consider Alternative Investments
Speaking of broader diversification, 2023 holds promise for alternative investments finally earning a place in everyday investor portfolios.
The portfolio for 2023—no matter your net worth, risk tolerance, or time horizon—should include an increased allocation to alternatives. With their low correlation to traditional asset classes like stocks and bonds, alternatives could blunt inflation- and recession-induced volatility and buoy returns more than dividend stocks alone.
Previously reserved for accredited investors and seasoned traders, everyday investors can easily access alternative asset strategies like commodities and managed futures through a decent selection of low-cost exchange-traded funds (ETFs) and mutual funds.
While expense ratios trend higher than the average fund, the performance of alternative assets may outweigh the higher costs.
4. Savings Bonds Are Still Sexy
If there’s a silver lining to the inflationary cloud, it’s the newfound popularity of savings bonds—specifically Series I savings bonds. In April 2022, the I bond rate jumped to a historic high of 9.62%, contrasting the S&P’s year-to-date 15% decline.
Investors eager to lock in that phenomenal rate bought $979 million in I bonds on Friday, Oct. 28—the last purchase day before the semiannual rate reset—and crashed the Treasury Direct website. You’d think the U.S. Treasury was selling Taylor Swift concert tickets.
For those seeking alpha for their extra cash, I bonds at the lower (yet still phenomenal) 6.89% rate are available through April 30, 2023. While illiquid for one year after purchase, it’s tough to argue with a guaranteed rate of return backed by the full faith of Uncle Sam.
4. Watch Out for Layoffs
The hashtag of the year on social media could be #layoff. Since mid-November, tens of thousands of employees have been laid off from tech behemoths like Meta, Amazon, Lyft and Twitter.
While boldface tech names have seen very high-profile waves of labor force reductions, other industries have seen their own losses. Real estate startups like Better, Redfin and Opendoor have slashed headcounts as rising rates and home prices dried-up mortgage applications, closed sales and corporate revenues.
As cash-strapped public companies try to shore up their balance sheets ahead of a potential recession, the year ahead could see the undoing of the historically strong U.S. labor market. While experts predict that new college grads won’t be at a loss for job offers, entry-level positions have less impact on corporate bottom lines.
That mid-career—especially in tech-centric specialties—could weigh on unemployment figures. Companies seeking to whittle payroll may pursue leaner staffing protocols, leaving plenty of talent on the sidelines to appease shareholders.
5. Can Crypto Recover?
It is pretty easy to argue that 2023 has to be a better year for crypto than 2022 since it could hardly be worse.
Multiple stablecoins slipped their pegs in 2022—including TerraUSD and Tether, fueling a midyear crypto crash that wiped out hundreds of billions in value. Crypto exchanges, meanwhile, were hobbled by growing pains and layoffs (Coinbase)—not to mention the sudden implosions of FTX.
Moving into 2023, look for cryptocurrency businesses to woo investors with stories of cash reserves instead of trendy coins and celebrity endorsements. And look for big developments in cryptocurrency regulation from Washington, D.C.
The Fed launched its 12-week central bank digital currency (CBDC) proof-of-concept project in mid-November, and legislators remain excited to advance crypto regulation legislation.
Unfortunately, many blockchain conversations will likely be colored by the debacle at FTX instead of the technology’s long-term, untapped potential.
7. New Interest in Renewables
The landmark $1.2 trillion infrastructure bill of 2021 and the Inflation Reduction Act of 2022 make trillions of federal investments available for renewable energy projects.
While supply chain issues stymied clean energy developments from electric vehicles (EVs) to solar panels over the last two years, 2023 could be a very good year for renewables.
With battery storage and EV adoption inextricably intertwined, BDO Global predicts a banner year for renewable energy storage systems. Increased competition in the EV market from newcomers like Rivian, Lucid, Ford and Chevy could put mainstays like Toyota and Tesla on their heels.
And natural gas shortages stemming from European Union conflicts have increased policy momentum for clean and renewable sources.
8. Hybrid Robo-Advisors May Have a Moment
Recent data from Parameter Insights show that investors exited self-directed investment tools like robo-advisors and brokerage accounts at a staggering pace in 2022. Theories on the exodus abound, but two lead the charge: Wealthier investors may be flocking to traditional financial advisors, and DIYers may be content to wait out a market recovery with cash in hand.
No matter the reason, hybrid robo-advisors—those that offer algorithm-driven investing plus access to traditional advisors—may be teed up for a lot of interest in 2023.
With consumers demanding more value for their money during inflationary times, the low-cost/expert advice behind hybrid robos hits the zeitgeist. By offering a combination of services like automatic rebalancing and tax-loss harvesting with financial advisor access, and at a fee typically lower than traditional advisors—
Price-sensitive economies make investors more value-driven than ever, which positions hybrid robos as the best of both worlds for investors eager for guidance but anxious about costs.
9. Estate Planning Enjoys an Upward Trend
Even if the year ends with the death of Twitter at the hands of a petulant billionaire, 2022 was an excellent year for end-of-life preparations. A study from Caring.com found that the number of Americans undertaking estate planning is rising.
As of 2022, 54% of respondents with postgraduate degrees now have estate plans—a 15% increase over 2021 figures. Moreover, the number of young adults with a will has also increased by 50% compared with pre-pandemic levels.
But with stock market returns lagging and inflation muddying 2023’s outlook, what could inspire investors to continue estate planning’s upward trajectory?
In a time where much seems beyond control, estate planning and the asset protection it can provide is 100% within an investor’s control. Holly Geerdes, an estate planning attorney at the Estate Law Center, says that estate planning isn’t so much about death or assets. Instead, it’s about taking control and having your say on what your wishes, wants and concerns are today to live on in the years ahead.
How well homes have performed as an investment
If houses are investments, then they’re subject to the harsh math of investing losses.
However much an asset falls in price, it has to rise by a larger percentage just to get back to the starting point.
The national average resale home price peaked at $816,720 in February and has since fallen a bit more than 21 per cent to $644,463 in October. To get back to the peak, we need the average price to rise by almost 27 per cent. Figure on it taking between four and five years to do that, if prices bounce back enough to revive the toxic idea that houses are investments.
Treating houses as investments means the death of affordability. The longer prices decline or flatline, the more opportunity there will be for home ownership to remain a viable middle-class goal.
Still, the investment mentality is a big reason why our housing market overheated. Attention must be paid.
What houses have going for them as investments is a decades-long history of price appreciation that beat inflation, and a capital gains tax exemption on the sale of a principal residence. That tax break is a key support for the idea of housing as a financial asset.
There are steep costs if you own a home, including maintenance, improvements and mortgage interest. But never mind that. Houses have clearly been seen as a can’t-miss investment in the past two years. The only way to explain the questionable buying decisions made in 2021 is that people saw houses and condos soaring in value and wanted a piece of the action.
House prices are falling in many cities, which adds some gritty authenticity to the idea of houses as an investment. Stocks are investments and everyone knows they go up and down in value.
Let’s look at how a recovery in house prices might play out. The annualized average price gain from 1980 to 2021 for resale homes was 5.8 per cent, which is an impressive three percentage points above the average inflation rate for that period.
If houses appreciate at an average annual rate of 5.8 per cent for the next 4.5 years or so, the average resale price would exceed the February peak. With a growth rate in prices of 2.9 per cent, it would take about 8.5 years to recover.
You’re in better shape if you bought in 2020 or early 2021, when mortgage rates were cheap and pandemic lockdowns drove people to find homes with more living space. If you bought at the average national resale price in January, 2021, you’re ahead by 3.7 per cent ahead, based on the average resale price for October. A purchase at the average price in October, 2020, leaves you up about 6 per cent.
There’s plenty of investment goodness left in a home bought at the average of $525,000 in October, 2019 – current prices are cumulatively almost 23 per cent higher than that, or 7.1 per cent on a compound average annual basis.
Investment success in housing comes at the expense of affordability for people trying to buy into the market. Expect to see more of this, not less.
Further increases in mortgage rates could hold back a price recovery, but there’s growing evidence that we are close to the end for the current cycle of rate hikes. A recession is possible, but the consensus so far is that it will be a) mild, and b) unlikely to cause rampant unemployment, which is deadly for housing. We still have a very tight job market in some sectors.
A clear advantage for housing is that nearly 1.45 million immigrants are expected to come to Canada in the next three years, a big number for a country with a population of not much more than 38 million. Expect housing supply to increase in the years ahead, and expect it to be soaked up to some extent by newcomers to Canada.
The historical 5.8 per cent growth rate in Canadian house prices was powered by a decades-long trend of falling interest rates. We could see falling rates by late next year. TD Economics sees the Bank of Canada’s overnight rate falling in the fourth quarter of 2023, while the Government of Canada bond yields that influence fixed mortgage rates are expected to fall through the year.
A quick rebound in house prices would end the dream of home ownership for young adults in some big cities. Prices haven’t fallen enough yet to discredit the seemingly unshakable idea of houses as an investment.
Immigration in Canada: Refugee's plea for housing answered – CTV News
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