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Japan GPIF says to sell US$18b less assets in 2013/14

Government Pension Investment Fund (GPIF) Chairman Takahiro Mitani speaks during an interview with Reuters in Tokyo February 4, 2013. — Reuters picGovernment Pension Investment Fund (GPIF) Chairman Takahiro Mitani speaks during an interview with Reuters in Tokyo February 4, 2013. — Reuters picTOKYO, Feb 4 — Japan’s Government Pension Investment Fund (GPIF), the world’s biggest public pension fund with investments mostly held in Japanese government bonds, plans to sell 1.7 trillion yen (RM57 billion) fewer assets to pay pensions in 2013/14 than it sells this fiscal year.

GPIF Chairman Takahiro Mitani told Reuters in an interview today that the fund, whose portfolio of US$1.2 trillion (RM3.7 trillion) is bigger than the Mexican economy, will review its long-term investment target and portfolio allocation model around April.

The review should include a discussion of the investment strategy towards Japanese government bonds, which form two-thirds of GPIF’s portfolio, Mitani said, as yields on 10-year JGBs were languishing at around 0.8 per cent.

Meantime, he said, the fund plans to raise about 4.7 trillion yen for pension payouts for the financial year starting in April, down 26.6 per cent from the planned sale of 6.4 trillion yen during the current year.

“We have already completed securing the necessary amount of cash needed for pension payouts for the current business year,” Mitani added.

GPIF became a net asset seller for the first time in 2009/10, and investors in JGBs closely follow the fund’s sales.

The public fund cashed out about 2.54 trillion yen of domestic bonds and foreign bonds during 2011/12.

Mitani, a former Bank of Japan executive also said that he did not think Japan’s equity market was overheating, despite a near 30 per cent climb since mid-November, and that foreign investors’ perceptions of the Japanese market had improved since Prime Minister Shinzo Abe took power in December.

“Regarding the question on whether or not Japanese shares are near their top, I would say I don’t think so,” Mitani said.

REVIEWING ALLOCATIONS, DEBATING JGBS

Last year, a Board of Audit report, requested by the upper house of the national assembly, called for the public fund to consider reviewing its target and allocations.

Under the current mid-term plan, the public pension fund is required to raise a nominal annual return of 3.2 per cent, or 1.1 per cent above the rate of change in nominal wages.

GPIF allocates its funds in four conventional asset classes — foreign equities, domestic equities, foreign bonds and domestic bonds.

It makes allocations in line with its model portfolio, which give a weighting of 11 per cent to domestic stocks, 67 per cent to domestic bonds, 9 per cent to foreign stocks, 8 per cent to foreign bonds and 5 per cent to short-term assets.

Mitani said he did not know whether it was necessary to change the portfolio drastically, but welcomed the forthcoming review, and particularly as it would give a chance to debate JGBs’ place in the portfolio.

“This will be a good opportunity to review our mid-term investment target,” the chairman said.

The public fund is making an effort to improve its investment returns.

GPIF plans to complete the selection of asset management companies to manage its US$136.05 billion foreign equities portfolio around summer, Mitani said.

Mitani said GPIF was in the second stage of its selection process, having whittled down the number of candidates after issuing a tender in June.

GPIF last chose fund managers for foreign stocks in March 2009, when it appointed 14 asset managers for its foreign stocks portfolio.

GPIF is expected to start the process of picking new managers for Japanese equity investment once the foreign equity managers have been selected, Mitani said. — Reuters

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