Japan Pension Wants United Fund

(June 30, 2010) — The head of Japan’s Government Pension Investment Fund (GPIF) of Japan, the world’s biggest public pension fund whose 122.5 trillion yen ($1.35 trillion) in assets under management is greater than India’s GDP, rejected a proposal to split the fund to achieve higher returns, Reuters reported.

Takahiro Mitani, president of the fund, told the Reuters Japan Investment Summit on Tuesday that despite aims to achieve greater transparency, splitting the GPIF into two asset management bodies — one for safe assets and one seeking higher returns — would be inappropriate and inefficient. He said the divided fund would require more staff and raise costs. The fund currently consists of about 80 people. “If we compare that with other public pension funds overseas, we are highly efficient,” Mitani told Reuters.

In spite of the pension’s relatively conservative investment approach, the GPIF suffered a 9.7 trillion yen loss in the fiscal year ended March 2009. The fund’s head has said he believes the GPIF should continue its investment in safe assets rather than new asset classes, but added the fund is always investigating the possibility of diversifying its investments. Currently, the pension holds about two-thirds of its assets in yen bonds – its target portfolio consists of a 67% allocation to domestic bonds, 11% to domestic stocks, 9% to foreign stocks, 8% to foreign bonds and 5% in short-term assets.

In related news, Japan’s public fund said Wednesday that gains in domestic and international shares boosted the GPIF’s performance, lifting the rate of return on its investment to plus 7.91% in the 2009/10 financial year, compared to a record loss of 7.57% the previous year.