Japan's GPIF Chairman: Asset Sales Expected to Remain Steady Next Year

(June 21, 2011) — Japan’s public pension fund, the world’s largest, anticipates asset sales to be steady next year.

At a Reuters Rebuilding Japan Summit in Tokyo, Takahiro Mitani, chairman of Japan’s Government Pension Investment Fund (GPIF), said he does not expect asset sales to rise sharply in the year to March 2013, despite Japan’s first wave of baby boomers becoming eligible for pension payments. “There is a high possibility that we’ll see a similar amount of sales that we’ve seen last year, this year and next year,” he said.

The assets under management of Japan’s GPIF total about $1.4 trillion, which is larger than the Canadian economy. The fund had estimated that for the past financial year that ended March 2011, it would sell more than 6 trillion yen in assets to generate cash for payouts, Reuters reported.

Mitani added that the fund expects to soon begin investing in emerging market equities, and it is in the process of selecting fund managers for the asset class. Additionally, GPIF’s chairman calmed fears over the impact of the March 11 earthquake, noting that the disaster did not spur a reshuffling of the fund’s portfolio. “We’ve closely watched the market after the earthquake. Market volatility increased temporarily, but in general the impact of the earthquake was limited,” Mitani told Reuters.

Echoing Mitani’s statements regarding the negligible impact the March earthquake and tsunami had on the portfolio, an April survey by JPMorgan Chase & Co. showed that nearly 89% of respondents said that the natural disaster does not have a “major” impact that will lead to a change of investment plans. The remaining 11% expressed concerns that investments may not be completed as expected or may be altered depending on the circumstance.

The long-term, relatively unconcerned view from an investing standpoint follows similar views by consultants over recent turbulence in the Middle East.

In February, following unrest in Egypt, Matt Stroud, a member of Towers Watson Investment’s Global Investment Committee, responsible for the firm’s views on the economy and markets, said that Towers Watson Investment hadn’t witnessed a noticeable difference in regards to his clients voicing heightened concern about further turmoil in emerging markets. “We’re keeping our eyes wide open in regard to the situation in Egypt, looking to see if it takes a turn toward more violence, and certainly the picture could change, but so far clients are anticipating good economic activity and equity returns within expectations.” He added: “To address potential worries, Towers Watson Investment would want to make sure we understood whether client fears stem from something specific in regards to Egypt, such as a spike in the price of certain commodities like oil, or whether it stems from something broader, such as geopolitical risk.”