Japan's Internal Minister Seeks Higher Returns by World’s Largest Public Fund

(January 25, 2010) — Japan’s government minister called for review of the $1.36 trillion public pension fund, the world’s largest, to seek higher returns, following a record loss of 9.7 trillion yen ($108 billion), in the financial year that ended March 2009.

Kazuhiro Haraguchi, internal affairs minister, said the Government Pension Investment Fund (GPIF) should generate greater returns than it has earned the last few years. He also expressed concern about having a single body managing such a massive fund, with one authority, the GPIF president, giving final approval regarding the fund’s asset allocation. “We need to verify whether it is appropriate for only one organization to manage such a huge fund of more than 120 trillion yen,” Haraguchi said, according to Reuters.

Yet, the fund has proudly claimed that its conservative strategy helped limit its losses in 2009 compared to foreign pension funds, and Health Minister Akira Nagatsuma, who supervises the fund, affirmed it should maintain its conservative investments.

The GPIF currently holds 67% of its assets in Japanese government bonds. Eleven percent of the public fund’s portfolio is in domestic stocks, 9% is in foreign stocks, and 8% is in foreign bonds, Reuters reported. Starting in April, the GPIF is scheduled to manage its funds under a new investment target. 

With about $122 trillion in assets, the Japanese fund is bigger than the 2008 GDPs of Australia, India and Mexico. It’s nearly seven times bigger than California Public Employees’ Retirement System (CalPERS), America’s largest pension fund with about $200 billion in market assets.