Assets in the discretionary stewardship of Japan’s fund managers rose 2.98% during the first financial quarter ending on 30 June to reach a record 205 trillion yen, figures released by the Japan Investment Advisors Association (JIAA) show. The bulk of the business was sourced from domestic pension funds but 32.7tr yen came via 1,115 mandates from clients overseas.
The firms held 4,441 domestic corporate pensions mandates, down 91 on the previous quarter, and 265 government mandates, up by five on January to March.
The asset allocation of their portfolios taken as a whole was notably more stable than in recent quarters — with 19.53% in Japanese bonds (compared with 19.99% three months prior and 28.03 a year earlier) and 26.87% in domestic stocks (respectively 25.96% and 22.34%)
This is not surprising given that the Government Pension Investment Fund accounts for around 45% of all money under discretionary management and over the same period it completed implementation of a new asset allocation policy which saw a marked shift from bonds to stocks.
As GPIF manages its passive domestic bond portfolio in house this does not show in the JIAA figures. Neither do amounts managed by Resona Bank and Mitsubishi UFJ Trust & Banking, which are not members of the Association, nor sums held in pooled accounts at life insurers and trust banks.
Bearing all that in mind, a quick back-of-the-envelope calculation to remove the amounts which GPIF is known to have invested in each category suggests but does not prove that the country’s corporate pension funds were disposed at 30 June as follows:
Domestic bonds 19.55%, or 40.08tr yen;
Domestic stocks 26.90%, or 55.16tr yen;
Foreign bonds 23.20%, or 47.58tr yen;
Foreign equities 18.82%, or 38.60tr yen;
Other (including ‘short-term’ and ‘real estate-related securities’) 11.53% or 23.64tr yen.
[These percentages are quite different from those found in a recent J.P.Morgan poll of 131 pension funds. See 14 September posting below “Are interest rates or demographics driving asset allocation?]
The international part of the portfolio is an inversion of today’s GPIF holdings where bonds account for just 13.08% of overall investments and equities for 22.32%.
With GPIF giving the lead, fund management firms could find corporate retirement schemes’ interest foreign stocks rising.
Today company pensions have almost as much invested in American equities as those of all other markets combined but those seeking. Yet if rises in US interest rates push down the country’s stock valuations they could still attract more interest from long-only equity investors for whom the cost of credit is immaterial.
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This blog would not exist without the help and humour of Diane Stormont, 1959-2012