DIC Pension to Renew RE Investing; World's Biggest Pension to Split Assets

(June 23, 2010) — The Dainippon Ink and Chemicals Incorporated (DIC) pension fund plans to invest in real estate at home and abroad for the first time since 2006, when the subprime mortgage crisis was emerging, Bloomberg reported.

“One of the best investment decisions we made was to exit all our real estate investments in 2006 on the view that property prices worldwide were expensive,” Hideo Kondo, the asset management director of the fund, said in an interview in Tokyo with the news service. “But now, we’re starting to see some investment opportunities in the real estate market.”

The plan by the fund, which manages 87 billion yen ($959 million) of assets, comes after Japan’s commercial land prices dropped to the lowest in at least 36 years. Japanese pensions are now adjusting their investment following two decades of waning markets. Dutch money manager Robeco Group, for example, aims to double assets from Japanese pension funds within two years, shifting investments away from traditional asset classes such as bonds and equities.

Currently, DIC invests 55% of its assets in domestic bonds and the remaining capital in domestic and overseas equities, Kondo confirmed with Bloomberg. Alternative investments, which includes real estate, currently accounts for about 16% of the portfolio.

DIC’s fund targets a yearly return of 3.5%.

Separately, the 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, may need to split its asset management into two portions to raise transparency. The panel decided that one portion would be for safe assets and the other for seeking higher returns, a government panel said in an interim report on Wednesday.

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.