New Tokyo Stock Exchange code asks companies to be nice

The Tokyo Stock Exchange has just published its Corporate Governance Code of which a provisional English translation is available here. The Code contains several sensible recommendations but not much by way of enforcement.

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Pension funds’ investment performance sustains 7-year upturn

The crisp account below of how a model Japanese pensions portfolio would have performed in the first quarter of the 2015 calendar year is taken from the just published latest edition of Towers Watson’s Global Pension Finance Watch.  The level reached on the actuarial consulting firm’s index is now the best it has been since September 2008.

Towers Watson 1Q 2015 global pesions finace

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

 

 

 

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Institutions missing the bus on direct property investment

KKR Hotel Tokyo

KKR Hotel Tokyo

Japan’s institutional investors look with some favour on both private and public real estate investment trusts but are still fighting shy of directly holding property — especially overseas where insurance companies’ memories of the missteps during the 1980s boom have yet to fade.

Small surprise then that the latest ranking of the world’s top 150 real estate investors by Investment & Pensions Europe magazine should include only two Tokyo-based entities: the Federation of National Public Service Personnel Mutual Aid Associations (known as KKR, the acronym of its name in Japanese) at 138th and the Bank of Japan at 150th.

What is a surprise is the lowly US$1.6 million that S&P Capital IQ, which calculated the numbers for ranking, puts on the value of KKR’s holdings. Either the pension fund has quietly sold the 10 hotels which bear its name in Tokyo, Osaka, Hiroshima, Sapporo and elsewhere or this is a mistake.

In recent years Japan has experienced a rush of funds into warehouse property but it was led not by locals. Rather in 2011 Singapore’s Global Logistic Properties set up a joint venture with the Canada Pension Plan Investment Board that now holds seven logistics parks in the country.

Two years later Australia’s IFM Investors, owned by 30 of the country’s pension funds, announced it was as opening an office in Tokyo. At 31 March this year IFM had total assets under management of $56 billion.

European retirement schemes are making their debut too with the Bayerische Versorgungkammer, which invests about 62 billion euros on behalf of twelve of Bavaria’s professional and municipal pension schemes, buying a 30,00 square foot commercial property in Osaka.

Meanwhile Reuters reports that the sale of Tokyo’s Simplex Investment Advisors, a property asset manager put on the block by US owners Aetos Capital Real Estate, is expected to fetch about 150 billion yen. Bidders are said to include Blackstone Group of the US, Hong Kong alternatives investment firm PAG and Japanese property firm Hulic Co.

1 Angel Lane

1 Angel Lane

And in the faraway  City of London Japanese securities behemoth Nomura has it European headquarters at 1 Angel Lane — where its landlord is a company 50% owned by Oxford Properties which is in turn owned by the Ontario Municipal Employees Retirement System.

On 13 May 2015 A$1=96.624 yen and Euro 1= 135.37 yen.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

 

 

 

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Japanese mutual funds’ US$ equities holdings leap 42% in year

Jap Mutual funds top 20 foreign holdings by currencies Japanese mutual funds’ assets rose by 21% to 97,027.6 billion yen in the year ending 31 March 2015 when the proportion in foreign investments fell slightly from 33.6% to 31.8%, a number which masks some very big shifts within portfolios.

Of the 30,911bn yen in overseas instruments, equities accounted for 5,401.5bn yen, a rise of 26.5%, while bonds were up by just 3.7% but at 13,468.2bn yen are still by far the largest single asset class.

US dollar assets rose 31.5% to 17,250bn yen. Bonds accounted for 5,342.9bn yen of this, a rise of 16.1% on a year earlier — not much given the translation gains Jap Mutual funds top 20 foreign equities by currenciesavailable as the Japanese currency fell 13.5% against the American unit during the term.

Meanwhile US-dollar denominated equities saw a massive 42.9% leap to 2,809.8bn yen. This reflects the rise in he US stock market as well as currency translation gains  but it is not possible to discern what, if any, of the climb came from mutual funds putting more money abroad during the year

The data come from an analysis of the numbers  submitted by the 70-odd asset managers in the business to their trade body, the Investment Trusts Association. Their portfolios also include deposits and investment securities other than the stocks and bonds which are their mainstays.

Still in foreign equities, only those denominated in the top 20 currencies saw gains. The remaining 20+ fell with those of Poland dropping 14.4%, Thailand 20.9% and Malaysia 45.6%. Jap Mutual funds top 20 foreign bonds by currencies

The biggest gainer overall was India — up 120% to 394.0bn yen of which 86.7bn yen was in rupee-denominated equities (+86.7%) and 80.4bn yen (+666.6%) in bonds. At the other end of the scale was Nigeria which endured a 70% collapse to reach just 1.7bn yen.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

 

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Life insurers reap huge boost to profits from asset management

T&D Holdings, owner of Taiyo Life, Daido Life and T&D Financial Life, is forecasting a rise in consolidated ordinary profits for the year ended 31 March 2015 of 26.8% to 189 billion yen thanks to an increase in gains on sales of securities, a company announcement said.

The firm has also upped the outlook for net income by 22.1% to 94bn yen due a climb in interest and dividends received, plus rising revenue from real estate for rent.

The news comes hard on the heels of a statement from Dai-ichi Life, Japan’s largest life co by premium income, that it expects net income for the year to have risen by a whopping 77.5%, to 142 billion yen, on an ordinary profits jump of 27.7% to 406bn yen.

There is no word as yet on whether the bulk of the gains arose from domestic or foreign investments and, if the latter, the degree to which the improvement is derived via translation gains from a fall in the value of the yen.

The  Nippon Life, currently the largest firm in the sector by assets under management, is a mutual which has no need to announce changes in earnings expectations. Meanwhile the three big insurance holdings companies, MS&AD, Sompo and Tokio Marine, have yet to make any statements. All are dwarfed by Japan Post Insurance which expects to go public in the second half of the current financial year.

News of much improved earnings from asset management appeared at the same time that the Japan Times reported  new government estimates showing that the number of children in Japan has fallen to a record low of 16.17 million, extending a 34-year decline.

The shrinking population has naturally meant shrinking business for life cos which have focussed expanding overseas and continue to do so even though the now weakening yen has made it more expensive.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Life cos look to boost overseas investments on weaker yen

Reuters’ annual poll of life insurers’ investment intentions (summarised in the tables below) finds the companies looking to reduce their Japanese bond holdings while boosting allocations to overseas debt and slightly increasing or keeping steady those to domestic equities.

Published on the day when the foreign exchange rate was running at US$1=118.95 yen, the entities whose views were captured via interviews and news conferences, mostly saw the value of the domestic currency weakening.

US$1= 130 yen proved a popular target with minnows such as Asahi, Fukoku and Daido as well as with giant Dai-ichi Life which last year overtook the mighty Nippon Life in terms of premium income. Nippon Life still the leads the pack in assets under management with 60.6 trillion yen out of an all-company total of 180tr yen.

For Reuters’ coverage of individual firms’ intentions in the year to 31 March 2016 click these links:

Asahi, Dai-ichi, Fukoku, Meiji Yasuda, Mitsui, Nippon, Sumitomo   and Taiyo

Foreign bonds

Asahi Life       to invest 200 bln yen in foreign bonds for this FY                                         Daido              to further increase holdings after buying 360bn yen last FY                          Dai-ichi          to increase hedged bonds, stance on unhedged bonds depends on FX levels Fukoku           to invest 200 bln yen in hedged foreign bonds for this FY                               Meiji Yasuda to increase unhedged foreign bonds, restrain increasing hedged bonds Mitsui             to boost FX-hedged and unhedged bonds by around 50bn yen each      Nippon           to increase holdings of both FX-hedged and unhedged bonds                         Sumitomo      to increase holdings                                                                                                  Taiyo               to consider slightly increasing holdings; hedge ratio likely to drop to 60%

Japan Bonds

Asahi Life       to cut 200bn yen for this FY                                                                       Daido              finding it difficult to increase holdings at low yield levels                      Dai-ichi          to maintain holdings after reducing in FY2014/15, plans to buy if yields rise Fukoku           to cut 100bln yen for this FY, compared to a cut of 80bln yen last FY                Meiji Yasuda sees holdings decreasing with more bonds maturing than their purchases Mitsui             to reduce by around 50bn yen, started reducing holding in H2 14/15     Nippon Life   to restrain fresh investment to minimum, holding likely steady         Sumitomo      to forego further investment if yields stay low, will buy if yields rise       Taiyo               to consider slightly decrease after buying 30ln yen in previous period

Japan stocks

Asahi Life         to maintain holdings steady                                                                          Daido                 to slightly increase its holdings                                                                      Dai-ichi             to keep holdings steady                                                                                Fukoku              to invest in 100bn yen, same with last FY                                                           Meiji Yasuda    to cut holdings slightly                                                                                       Mitsui                to increase holdings by around 10bn yen                                                  Nippon              to keep holdings steady                                                                                        Sumitomo         to slightly increase holdings                                                                               Taiyo                  to consider slightly increasing holdings

Foreign shares, alternatives investments

Asahi Life         to increase holdings by 20-30 bln yen                                                          Daido                to slightly increase holdings                                                                                   Dai-ichi             to keep increasing foreign stocks and alternatives                                Fukoku              put about 150bn yen in foreign stocks, fast-growing asset classes            Meiji Yasuda    to increase investment in foreign shares                                                Mitsui                n/a                                                                                                                     Nippon              to increase foreign stocks                                                                             Sumitomo         to slightly decrease foreign stocks, loans                                                Taiyo                  n/a

Expected market ranges                                                                                     xzxzxzxzxzxzxxDollar/yen   Euro/yen   NIKKEI                 JGB 10-yr %   US 10-yr%     Asahi  Life       Y113 – 130    Y113 – 144   17,000 – 22,000        0.2 – 0.75   1.6 – 3.1         Daido                Y115 – 130    Y115 – 140  16,500 – 22,000        0.2 – 0.7      1.5 – 3.2  Dai-ichi            Y110 – 130    Y105 – 150  16,500 – 23,000        0.1 – 0.7      1.5 – 3.0 3.0   Fukoku             Y115 – 130    Y125 – 145  16,500 – 22,000      0.25 – 0.75   1.8 – 3.0    Meiji Yasuda   Y116 – 123    Y118 – 132   17,000 – 23,000       0.2  – 0.8     1.7 – 3.1          Mitsui               Y119 – 129    Y118 – 130   19,500 – 22,500         0.2 – 0.8    1.5 – 2.9     Nippon             Y115 – 125    Y125 – 135    18,000 – 22,000        0.1 – 0.6      n/a                Sumitomo       Y110 – 130    Y115 – 145     15,500 – 22,200        0.1 – 0.75   1.6 – 3.0    Taiyo                Y115 – 128    Y120 – 135    18,000 – 23,000        0.2 – 0.8    1.6 – 3.0

$1 = 118.8500 yen,  Reporting by Tokyo Markets Team; Editing by Biju Dwarakanath

Tables © 2015 Reuters

 

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Population smaller and older than ever, will accept immigrants

The population continued what the Asahi newspaper calls its “inexorable slide” in 2014 with figures published by the Ministry of Internal Affairs and Communications earlier this week showing the total falling to 127.08 million, almost the same level as 2001.

At the same time the daily recorded a less predictable development when it reported that 51% of the 2,016 people who responded to an opinion poll, which it conducted by mail, supported the idea of Japan accepting foreigners who wish to settle in the country.

This is almost twice the level at the time of a previous survey in 2010.

Over 75s now make up 12.5% of the country’s population and over 65s 26%. These are record levels which have, for the first time, pushed the number of seniors to more than double those in the under 14 age group.

It is not known what, if any, attempts were made to select the 3,000 adults initially mailed on the basis that they were representative of the population as whole.

The Asahi is generally seen as a left-leaning daily.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Great yield hunt bags CLOs, foreign property and drugs stocks

As the world and the Wall Street Journal continue to give way too much significance to Japan ‘overtaking’ China as the largest foreign holder of US treasuries, Japanese institutional investors and asset management intermediaries are adding other yield-producing items to their menus.

Collateralized loan obligations

Bloomberg reports in, American-Made Junk CLOs Now Being Served in Yield-Starved Japan, that

“To make it easier for Japanese investors to get to this U.S. debt, bankers have repackaged a dollar-denominated collateralized loan obligation into yen-denominated bonds, using derivatives to hedge out risk related to currency fluctuations.

“The Repackaged CLO Series GG-A1 Ltd, for example, consists of a special-purpose entity that will issue Japanese yen-denominated notes and is backed by the U.S. dollar-denominated notes” issued by Kitty Hawk CLO 2015-1 LLC, according to a Standard & Poor’s March 24 pre-sale report.

“Essentially, it transforms $249 million worth of a $331 million U.S. CLO managed by Guggenheim Partners Investment Management into highly-rated Japanese-yen denominated bonds, according to an April 15 Moody’s Investors Service report.

“The transaction was arranged by Mitsubishi UFJ Financial Group Inc, which is also the counterparty on the currency swap that mitigates the risk of losses from changes in the yen-dollar exchange rate”.

Real estate funds

Meanwhile the Japan Times/Bloomberg report, in Bubble-era missteps shape Tokio Marine property strategy that the insurer, one of Japan’s oldest, wants to:

“Increase overseas property assets by about 10 billion yen this years, and to raise that amount to 100bn yen ‘in several years’…Tokio Marine Property has already invested in property funds in the UK, Europe and Australia.”

The article notes further that “Japanese pension funds are tipped to lead the charge in term of overseas real estate investment as they seek to boost returns to meet payouts in one of the fastest aging nations”.

It is not clear whether this is intended to mean that retirement schemes will invest in physical property or real estate funds.

US treasuries again

The Financial Times cautions that Global property bubble fears mount as prices and yields spike and Wall Street Journal blogger Bylan Talley put his colleagues’ reporting into a sensible context in Did Japan Really Overtake China as the biggest foreign holder of US Treasury debt: A deeper look at the math. Unfortunately they appear not have read it.

Meanwhile the dash into drug makers stocks because they pay higher dividends than most other appears to have paused for breath.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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GPIF to bring more asset management in house, set up register

The Government Pension Investment Fund will this year begin to ‘balance’ its passive investments with actively managed holdings, according a report in the Nikkei which gives no source for the information.

The move is said to be part of the revamp of GPIF’s portfolio now underway which will see the Fund reducing its allocation to Japan Government Bonds and increasing those to domestic and foreign equities.

At the same time GPIF will streamline its management processes by establishing a register of firms who wish to do business with it and reviewing the performance of incumbent managers as often as once or twice a year. It also plans to do more in house and to double its staff to 150 within five years.

In the year ending 31 March 2014, according to the Nikkei, GPIF  paid external managers 25.3 billion yen.

For the details of who now manages what for GPIF see tables under “The Giants” tab above.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Company pensions see second year of double-digit returns

Defined-benefit corporate pensions enjoyed their second successive year of high investment returns in the 12 months to 31 March 2014, according to the latest annual rankings by plan assets by Nenkin Joho. The fortnightly newsletter’s numbers show many schemes enjoying yields in double figures and some surpassing 20%.TOP 20 DB penion funds nj basis

Nomura Research Institute led the field in growth terms with a return of 35.87% on 81,123 million yen of holdings. NRI has 4,000+ employees and includes advice to asset managers in its suite of products. By contrast Tokio Marine Nichido Life Insurance, with over 12,000 workers, saw the value of its portfolio drop 2.2% to 181,32mn yen.

In an era of continuing deflation, and before the current run-up in equities on the back of government buying, the overall results speak to the deployment of excellent asset management skills. And they are just what sponsoring companies need now that demographics mean most schemes’ annual benefits payments will exceed will their yearly contributions income for as far as the eye can see.

Nenkin Joho is published by Rating & Investment, the actuarial consulting subsidiary of the Nikkei newspaper. The weakness of its annual rankings is that it has to rely on funds being prepared to fill out and return its questionnaire.

This year responses were received from 320 of the 15,000+ ‘fund-’ and ‘covenant-type’ defined-benefit schemes then existence and from 117 of 527 of the ‘Employee Pension Funds’ (EPFs).

Fortunately some funds are repeat responders and so comparisons are possible.

Unfortunately Hitachi Ltd seems not to have responded to the latest round of data gathering leading to the omission of what has since 2004 been by far the country’s biggest company retirement scheme. The number one slot had previously been taken by the National Credit Union [Zenkoku Shinyo Kumiai] the multi-company plan for bank employees which several institutions later left.

At 31 March 2013 Hitachi Ltd had assets of 812,924 million yen – well ahead of current number one Toyota Motor Corp’s 645,660mn yen — and a very rapid growth rate thanks to good investment returns and the schemes of many former subsidiaries’ being brought under its wing as a consequence of the sprawling group’s corporate restructuring.

Conversely the multi-company National Electronic Machinery Industry fund responded this year for the first time since 2011.

Just beyond the top 20 shown in the table are Yamazaki Baking which returned 15.91% — following 16.22% the year before — on assets of 113,630mn yen, and Pfizer Japan with 15.68% — after 2013’s 16.22% — on assets of 111,488mn yen.

© 2015 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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