TOKYO—Three Japanese public pensions said Friday that they plan to shift more money into equities from domestic government bonds, following a similar move by the nation’s $1.1 trillion Government Pension Investment Fund.
The three funds control a combined ¥30 trillion yen ($249 billion), an amount roughly the size of Greece’s gross domestic product. They will adopt the same portfolio as the GPIF, according to a statement on the GPIF’s website.
The GPIF, the world’s largest pension fund, has been shifting assets to domestic and overseas equities since last year. Its reallocation—and expectations that other Japanese pension funds would follow suit—have helped push Tokyo’s Nikkei Stock Average to a 15-year high this week.
The moves into riskier assets come at the urging of Prime Minister Shinzo Abe, who hopes to secure higher returns for pension funds faced with a rapidly aging population while helping to reinvigorate financial markets.
The three smaller pensions’ decision to use the GPIF’s portfolio as a model reflects a 2012 law that mandates the consolidation of the nation’s employee pension system by October 2015. Though the funds will align their investment strategies, they will still be organizationally independent, welfare minister Yasuhisa Shiozaki said earlier this month.
The three smaller funds also hold assets that the GPIF doesn’t have, including real estate and educational and home loans to members. They will treat any such assets as either stocks or bonds, the statement said.
Data indicate the three smaller pensions have already started to shift their portfolios. Trust banks, which manage money for pensions, sold a net ¥389.1 billion of super-long Japanese government bonds in February, the sixth consecutive month of net selling, according to data released Friday by the Japan Securities Dealers Associations. Pensions are big investors in super-long JGBs as they invest over a long time horizon.
Strategists at JPMorgan Securities Japan Co. said in a note earlier this month that the three pension funds adjusting their portfolios in line with the GPIF’s would create ¥7.2 trillion in sales of domestic bonds, ¥2.5 trillion in purchases of domestic stocks, ¥1.6 trillion of foreign bond purchases and ¥3.1 trillion in foreign equities purchases.
The GPIF, which manages money for Japan’s national pension system and for private-sector employees, said in October that it would cut its allocation to domestic bonds by nearly half to 35%. The fund raised allocations to domestic and foreign stocks and foreign bonds to 25%, 25% and 15%, respectively.
The three smaller funds are the Promotion and Mutual Aid Corporation for Private Schools of Japan, which had ¥3.8 trillion in pension assets at the end of the fiscal year ended in March, 2014, the Pension Fund Association for Local Government Officials, with ¥18.9 trillion, and the Federation of National Public Service Personnel Mutual Aid Associations with ¥7.3 trillion.
Japanese Pension Funds Announce Portfolio Shift - WSJ
The three funds control a combined ¥30 trillion yen ($249 billion), an amount roughly the size of Greece’s gross domestic product. They will adopt the same portfolio as the GPIF, according to a statement on the GPIF’s website.
The GPIF, the world’s largest pension fund, has been shifting assets to domestic and overseas equities since last year. Its reallocation—and expectations that other Japanese pension funds would follow suit—have helped push Tokyo’s Nikkei Stock Average to a 15-year high this week.
The moves into riskier assets come at the urging of Prime Minister Shinzo Abe, who hopes to secure higher returns for pension funds faced with a rapidly aging population while helping to reinvigorate financial markets.
The three smaller pensions’ decision to use the GPIF’s portfolio as a model reflects a 2012 law that mandates the consolidation of the nation’s employee pension system by October 2015. Though the funds will align their investment strategies, they will still be organizationally independent, welfare minister Yasuhisa Shiozaki said earlier this month.
The three smaller funds also hold assets that the GPIF doesn’t have, including real estate and educational and home loans to members. They will treat any such assets as either stocks or bonds, the statement said.
Data indicate the three smaller pensions have already started to shift their portfolios. Trust banks, which manage money for pensions, sold a net ¥389.1 billion of super-long Japanese government bonds in February, the sixth consecutive month of net selling, according to data released Friday by the Japan Securities Dealers Associations. Pensions are big investors in super-long JGBs as they invest over a long time horizon.
Strategists at JPMorgan Securities Japan Co. said in a note earlier this month that the three pension funds adjusting their portfolios in line with the GPIF’s would create ¥7.2 trillion in sales of domestic bonds, ¥2.5 trillion in purchases of domestic stocks, ¥1.6 trillion of foreign bond purchases and ¥3.1 trillion in foreign equities purchases.
The GPIF, which manages money for Japan’s national pension system and for private-sector employees, said in October that it would cut its allocation to domestic bonds by nearly half to 35%. The fund raised allocations to domestic and foreign stocks and foreign bonds to 25%, 25% and 15%, respectively.
The three smaller funds are the Promotion and Mutual Aid Corporation for Private Schools of Japan, which had ¥3.8 trillion in pension assets at the end of the fiscal year ended in March, 2014, the Pension Fund Association for Local Government Officials, with ¥18.9 trillion, and the Federation of National Public Service Personnel Mutual Aid Associations with ¥7.3 trillion.
Japanese Pension Funds Announce Portfolio Shift - WSJ
