Japan pension funds boost foreign assets to highest on record
Funds bought a net $11.5b of overseas securities, bringing their total to 59.5 trillion yen
Tokyo: Japan’s public pension funds boosted holdings of foreign assets to a record in the three months through December, while reducing their investment in local sovereign debt to the least in more than a decade.
The funds bought a net 1.3 trillion yen (Dh42.2 billion or $11.5 billion) of overseas securities, bringing their total to 59.5 trillion yen, and also added to investments in domestic equities, Bank of Japan data published Friday show. They offloaded a net 704.4 billion yen in Japanese government bonds, leaving them holding 51.8 trillion yen of such debt, the lowest total since the third quarter of 2004.
The shifts may reflect trading by smaller peers of the $1.2 trillion Government Pension Investment Fund, which decided last year to align their investment strategies with GPIF’s from October. The retirement managers’ stock buying also came after a third-quarter rout in equities eroded the value of shares they already held, taking them further from target allocations.
Japan’s Topix index of stocks rebounded 9.7 per cent in the three months through December after plunging 13 per cent the previous quarter as China’s shock currency devaluation drove stocks around the world lower. A measure of global equities rose 4.6 per cent after a 9.9 per cent drop the three months before.
New Strategy
Pension funds for civil servants, local government officials and private schoolteachers, which managed about 30 trillion yen at the time, said a year ago they would adopt targets of 25 per cent each for domestic and foreign equities, 35 per cent for domestic bonds and 15 per cent for overseas debt as of October 1. GPIF doubled its equity allocation the previous year.
The world’s biggest pension fund posted a 3.6 per cent return in the three months ended December, its best such gain in a year, after a loss in the previous period. It’s likely to go back into the red this quarter as a sell-off resumed in equities, with the Topix down about 12 per cent this year. That’s bad timing for Prime Minister Shinzo Abe, who supported the public retirement manager’s move to boost shares, as he prepares for elections this summer.
