TOKYO, July 7 (Reuters) - Sumitomo Mitsui Trust Holdings will invest $1.5 billion in funds managed by Apollo Global Management, the Japanese firm said on Thursday, in a partnership ranging from private equity and real estate to infrastructure.

The move comes at a time when global private equity firms have been looking to expand in Japan, seeing huge potential in the country's growing private asset markets.

The partnership with Japan's largest trust bank could allow Apollo to expand its relatively small presence, compared to peers such as KKR & Co Inc and Bain Capital.

Sumitomo Mitsui Trust will invest the funds in a $10-billion proprietary portfolio from the Apollo group, as part of total third-party capital of more than $5 billion from Asian institutional investors to be added to the Apollo portfolio.

Sumitomo Mitsui Trust aims to beef up its business in private assets and give Japanese clients access to Apollo's alternative investment products.

The move is also part of its strategy of boosting capital efficiency by reducing cross-shareholdings, a common practice in Japan where companies take stakes in partners to cement ties.

"The decision to make this investment is based on our belief that investing in this alternative asset strategy can produce less correlated, equity-like returns and low volatility," Toru Takakura, the president of Sumitomo Mitsui Trust, said in a statement.

Last year, Apollo bought Showa Denko KK's aluminum business for about 50 billion yen. ($1=135.8400 yen) (Reporting by Makiko Yamazaki; Editing by Chris Reese and Clarence Fernandez)