RETAIL FUNDS | Cesar Tordesillas, Japan

Japan's giant pension fund eyes private equity investments

Japan's Government Pension Investment Fund may venture into alternative assets, such as private equity funds.

This was announced by GPIF Chairman Takahiro Mitani.

Mitani said the GPIF may invest in private equity firms, though he is concerned there aren't enough successful private equity deals in Japan.

"I have not heard so many successful stories about Japan's private equity investments. I don't know why that is. It seems there are many successful investments made by private equity overseas." 

He said the GPIF would not allocate money to hedge funds as investing in these doesn't fit with the fund's requirements for regular and a high level of disclosure.

Looking around for new and better investment returns is vital for the fund as for the past three years it has been
paying out more in benefits than it receives in contributions to the national pension system.

Mitani said he was concerned that fewer people were paying into public pension plans at a time when more people were retiring from work.

Japan's population is expected to fall by 30 percent to below 90 million by 2060, when the proportion of those aged 65 or older will have almost doubled from 2010, a government agency survey showed in January.

"We are considering expanding our investment targets to alternatives, which include infrastructure, real estate and
private equity," said Mitani.

GPIF is the world's largest public pension fund. It has assets of 108.2 trillion yen ($1.38 trillion), is worth more than the Australian economy, the world's 13th largest. It invests in four conventional asset classes, allocating funds in line with its model portfolio. This gives a weighting of 11 percent to Japanese stocks and 67 percent to domestic bonds, with 9 percent to foreign stocks and 8 percent to foreign bonds.

It also has 5 percent invested in short-term assets.

Mitani said the GPIF, which began investing in emerging markets this year, was selecting advisers for its future
alternative investment strategies aimed at diversifying and generating more returns for the long-term.

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