Nomura Holdings Inc, Japan's largest broker, said on Wednesday it would join hands with Norinchukin Bank in establishing a company which would gather pension money to invest in private equity funds.
The new firm will aim to manage some 300 billion yen ($2.6 billion) in five years, said Nomura spokesman Michiyori Fujiwara.
Many Japanese financial institutions have been reluctant to invest in private equity funds, not keen to see money locked up for long periods.
But faced with low domestic interest rates and an ageing population, corporate and public pension funds, whose assets are estimated to total about 300 trillion yen ($2.6 trillion) are now expanding their portfolios into higher-risk investments.
Nomura and Norinchukin, the main bank for Japan's agricultural cooperatives, plan to set up the firm in January. The Development Bank of Japan is also likely to take a stake.
It will invest in global buyout funds, setting up funds of funds that target returns of more than 20 percent over a period of seven to 10 years.
In another example of pension money hunting for better returns, Japan's largest private-sector pension fund, the Pension Fund Association, said last month it may resume investment in real estate for the first time in more than a decade.