TOKYO: Japan's Kokusai Asset Management said it plans to increase the weighting of euro-denominated bonds in its $33 billion bond fund, the world's second largest, due to a solid outlook for euro-zone economies.
"The euro-zone economy is improving, led by growth in Germany. We expect this to continue to make the euro the most attractive currency relative to others," Masataka Horii, who oversees Kokusai Asset's Global Sovereign Open fund, told Reuters in an interview.
Global Sovereign invests in government bonds globally with high credit ratings. It is popular with Japanese retail investors and has 2.75 trillion yen ($33 billion) in assets under management, making it the world's second-largest bond fund after PIMCO's Total Return Fund, according to data from Thomson Reuters Lipper.
Kokusai has been raising its weightings in the euro from around summer, Horii said.
The fund's euro weighting rose to 31.8 percent as of April 7, up from about 26.7 percent in October. The weighting is above the benchmark of Citigroup's World Government Bond Index at 30.7 percent.
Global Sovereign's weighting in US Treasuries and US agency bonds stands at 22.9 percent, below the benchmark of 26.5 percent.
Horii said the fund would look for opportunities to buy US dollar bonds, but was unclear whether it would make purchases in the near term due to uncertainty over the course of the Federal Reserve's quantitative easing policy.
Global Sovereign has ranked as the largest bond fund in Japan for nearly a decade, reflecting a push by Japanese investors to shift money out of savings accounts into higher-yielding foreign assets.
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