Norinchukin Bank, one of the biggest buyers of domestic asset-backed issues in Japan, is looking for investment opportunities in collateralized bond and loan obligations underpinned by Asian obligors, said a bank official in Tokyo.

The bank's international finance and investment division only began investing in Asian CBOs and CLOs last year, but it is hungry for more opportunities. "The advantage [of collateralized deals] is that they provide a well-diversified portfolio that does not require us to analyze the default ratio of each individual credit, which we would do in the case of a limited number of assets," he said.

Collateralized deals are also more efficient investments for Norinchukin, which employs a small number of analysts relative to the size of its total assets. "Since the number of bank officers is quite small, [CDOs] give us exposure to more countries yet help us manage our portfolio, which is quite large," the official explained. Collateralized deals are also advantageous for obligors, since they allow them cheaper funding and higher ratings, he added.

Norinchukin's current CLO/CBO portfolio for non-Japan Asia is roughly $50 million, he said, adding that there is a shortage of paper in most markets.

A key investment issue is the quality of the collateral manager. So far, the number of Asian CBOs is limited, making it difficult to assess the capabilities of different fund managers in the region. However, one fund manager that Norinchukin favors is Income Partners Asset Management (Asia) in Hong Kong, which most recently issued a $20 million CBO in July.

The bank is also interested in buying residential and commercial mortgage-backed deals out of Hong Kong, where the market is relatively transparent and it is easy to follow the performance of the issuer, he noted.

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