Few ‘promising’ products in a 1.4 quadrillion yen market

On 31 March 2014, Japan’s asset management market was nearing a mighty 1.5 quadrillion yen (then US$ 14.25 trillion).

Japan asset management market 2014-3-31Yet by the close of the calendar year on 31 December the Nomura Research Institute was noting in its annual report on the sector that the country “currently does not have many products that can be called promising from the standpoint of their outward characteristics”.

The authors of the study demonstrate the point by providing diagrams (see below) showing the state of supply and demand in each of the three segments they address, pensions, retail and financial institutions, and, they ask, “Can asset management companies adapt to the changes afoot?”

NRI’s reports are well known to industry veterans and should be read by more newbies. Produced every year since the 2010/11 edition – which followed a hefty inaugural volume in 2006 – they are generously made available here free–of-charge, presumably to promote the Institute’s business in advising asset management companies.

NRI product demandThe work is based on annual surveys of the fund firms’ priorities together with analyses of statistical sources which can throw light on likely trends. This time round questionnaires were distributed to 66 firms, 37 Japanese and 29 foreign, between July and September 2014.

The results are sparkling.

After years of noting no growth in what nonetheless remained a very large market, NRI found actual and potential expansion everywhere – though some of it arises from cross currents which will take skill to navigate.

Managers’ margins have already climbed to 30% — almost back to their peak of seven years earlier.

NRI footnoteAs already reported on ijapicap, defined-benefit pension assets under management at member firms of the Japan Investment Advisers’ Association rose 13.58% in the year ending 31 March 2014 (see archive June 2014 Segregated DB pensions hit 100tr yen, foreign managers shine).

NRI says this was the product of a 17.5tr yen inflow, thanks to asset price appreciation, countering a 5.8tr outflow which was “presumably largely attributable to EPFs [Employee Pension Funds] that are preparing to dissolve” – one of the trends which is set to continue.

Meanwhile the introduction in 2014 of NISAs (Nippon Individual Savings Accounts), which carry tax advantages, transformed the nature of demand in the retail market. Respondents to the Institute’s survey expect this trend to continue with 31.2% expecting the amount of such holdings to exceed 10tr yen by 2019. Others expected less but 6% plumped for a rise to 20tr yen.

Among financial institutions, banks have historically regarded securities investment as a parking place for surplus funds but since 2012 have come to see it ‘as a core source of profit’, says the study. In the 2013/14, however, their holdings were 30tr yen lower than the year before thanks to ‘the BOJ’s unconventional monetary policy launched in April 2013’.

Even banks with in-house expertise rely on outside advice

City and second-tier as well as regional banks are now seeking international diversification but through different routes. The city institutions, despite having in-house expertise, ‘heavily rely on AMCs’ [asset management companies’] analytical capabilities while their smaller brethren go overseas through private investment trusts.

Life insurers securities portfolios rose 6.8tr yen in 2013/14 only one third as much as in the previous term. Holdings of Japan Government Bond (JGB) holdings, which have long made up the bulk of the life cos’ investments, rose by only 1.0tr yen while foreign securities climbed by 5.5tr yen.

With a former mismatch between assets and liabilities now closing, through purchases of the new long-maturity JGBs, the firms may now ‘place priority on downside protection … by diversifying into assets with varying risk profiles and little mark-to-market impact (e.g. infrastructure, foreign credit) keeping interest-rate risk contained within a tolerable range’.

Twenty years of repeated change

The asset management industry has adapted to successive tides of change since 1995 when it was first allowed to operate outside of securities companies, trust banks and life insurers.

As this new order was coming into force dominoes fell when the Bank of Tokyo was forced into marriage with Mitsubishi Bank in 1996 and Nissan Life collapsed a year later. Both started waves of consolidation and re-consolidation which distracted management and did not end until 2013/14.

This allowed foreign firms to take pole positions in fund management and means that asset allocation within the institutions’ own portfolios simply stayed as it was.

On the demand side corporate pension funds entered into a fundamental restructuring in 2002 when the supplementary daiko benefit — contributions to which they had previously managed on government’s behalf — were handed over to the massive Government Pension Investment Fund, vastly increasing its size.

Corporate pension funds past their tipping point

A rising stock market meant that companies survived new regulations requiring them to make good immediately any hole in their retirement schemes. But with most now receiving much less in annual contributions then they pay out in benefits they are much more aware of the need to keep assets and liabilities in balance and to improve returns.

Now along comes another eddy for the industry to navigate: 500 EPFs have been told by the regulator to close with their assets either being paid out to employees, used to set up other structures or handed to GPIF, swelling its coffers even further.

And in a plea which will resonate in the US and the UK, NRI calls on the Japanese government “to introduce a [defined-benefit] pension scheme to serve as a successor to EPFs or a scheme for sharing risks between companies and their employees.”

© 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 gets Q1 return of 1.9%, settles into new asset allocation

The Government Pension Investment Fund has announced a first quarter 2015-16 return of 1.92% on its 141.121 trillion yen portfolio which is made up of 37.95% domestic bonds, 23.39% domestic equities, 13.08% international bonds, 22.32% international equities and 3.27% short-term assets.

GPIF Asset alloc Q1 2015~16During the term the value of the US dollar rose against the yen by 2.10% and a third to half of the increase in GPIF’s allocations to foreign securities is likely to some from changes in foreign currency valuations.

The Fund no longer gives the performance of its portfolio segments relative to their GPIF asset alloc at 2015-3-31benchmarks but in the quarter just closed Japanese stocks were the star performers returning 5.89% while the value of  local bonds holdings sank by 0.10% and foreign stocks and bonds were up 2.38% and 0.65% respectively.

GPIF is now comfortably within the boundaries of its new policy asset mix after the dramatic changes of the past two and a half years seems set for a period of stability.

GPIF aset alloc Dec 2012© 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 finally put 18-year nightmare behind them

When Japan’s Big Four private sector life insurers unveiled record first quarter profits last week and one became the third of the quartet to announce a major overseas acquisition, they marked an end to eighteen years of repeated consolidations in which many of the sector’s best known names disappeared.

Dai-ichi Life, which translates as ‘big number one’,  is now indeed the industry leader, however temporarily, with April-June core profit up by a hefty 56.8% from a year earlier to 160.5 billion yen. The climb has displaced Nippon Life where core profit rose 3.6% to 145.6bn yen and put the firm well ahead of Meiji Yasuda Life, up 6.8% to 115.5bn yen, and Sumitomo Life, up 5.5% to 85.3bn yen.

In February Dai-ichi led another field by completing the biggest ever acquisition by a Japanese life insurance company when it paid US$5.6bn for mid-sized US firm Protective Life.

Then in June the Nikkei reported that Nippon Life was in early talks to buy National Australia Bank’s insurance business for US$2.4bn. A month later Meiji Yasuda Life agreed to buy America’s StanCorp Financial group for US$5bn and in August Sumitomo Life entered into a definitive agreement to buy Symetra Financial Corporation, headquartered in Washington state, for US$3.7bn.

As the profits figures would suggest, the first quarter also showed signs of improvement in the sector’s ‘business-in-force’ measure which, according to the Life Insurance Association of Japan, was by the end of May up 0.2% on a year earlier — the first rise in 18 years.

Chiyoda, Kyoei, Taisho and Yamamoto and more — all gone

The nightmare began in April 1997 when the Ministry of Finance finally ordered Nissan life to close having watched it slide into increasingly deep trouble over the previous two years.

The development was reported as ‘the only Japanese life co to go bankrupt since the end of the Second World War’ yet it proved to be anything but an isolated incident. The years which followed saw repeated waves of consolidation in which such life cos as Chiyoda, Kyoei, Taisho and Yamamoto disappeared — often after being acquired by a stronger firm which was then itself acquired by another new grouping.

One of the chief causes was guaranteed savings products, the last of which has only recently expired. First offered by Nissan they spread to other firms which were unable to generate the promised returns in the tough domestic equities environment after 1990 when income from foreign holdings was also being slashed by a rising exchange rate.

As Japan entered recession the firms’ loans to business also shrank and as the nation aged there were progressively fewer lives top insure.

Simultaneously the deregulation of corporate pensions market, which began in 1995 and allowed retirement schemes to invest via specialist mandates, cut even more heavily into their pooled pensions business than into that of trust banks.

General insurers rode abroad on strong yen

In the time it has taken them to struggle back to health the life cos have seen their general insurer counterparts gain strength from investment abroad where they were able to use the strong yen to pick up acquisitions relatively cheaply.

The wholly government-owned Japan Post Insurance has yet to produce its annual report for the year ending 31 March and its first quarter figures. This giant plans to list on the stock exchange on 4 November according to Reuters so it should then become more transparent. To date only Dai-ichi is listed since Sumitomo and Meiji Yasuda are still mutuals

For the financial year ended 31 March 2014 Japan Post Insurance had a core profit of 482bn yen so Dai-ichi may not last long as the Big Number one.

© 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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Asset managers’ defined-benefit pension business hits record

The value of Japanese defined-benefit pension assets invested via segregated accounts at fund management firms rose 10.86% in the 2014/15 financial year to close the term on 31 March at 115,896.4 yen billion yen spread across 4,769 mandates, 241 fewer than 12 months earlier.

Top 20 DB pension managers at 31 March 2015Sumitomo Mitsui Trust Bank had the largest share of the trove at 19,368.6bn yen though the gap between it and second-ranked BlackRock Japan–which was number one from 2009, when it took over Barclays Global Investors, to 2012 -– narrowed to 3,905b yen from 8,704.8bn yen the year before.

All of last year’s top five retained a position among that elite quintet thanks to their domination of business awarded by the Government Pension Investment Fund, the world’s largest institutional investor. Top 5 DB govt pension managers at 31 March 2015                                                                                       Among those contending for corporate retirement scheme mandates the position is much more fluid with Sumitomo Top 5 DB corp pension managers at 31 March 2015Mitsui Asset Management the only top ten   firm retaining the same position as a year ago.

The rankings come from an analysis by the Japan Pension Industry Database of returns submitted to the Japan Investment Advisors Association by its members. These studies are now in their 20th year.

Japan is home to the second largest pool of retirement savings after the US; a placing it sometimes swaps with the UK in actuarial consultants Towers Watson’s annual analysis which facilitates comparisons by converting all numbers to US dollars. Outcomes thus depend on the strength or weakness of the yen and the pound sterling.DB pension assets by country 2013-14

Japanese sponsors are not closing their DB funds to the same extent as those in the UK.

JIAA filings do not include money managed in pooled accounts by trust banks and life insurance cos which report via a different route. Also omitted are amounts mandated to Mitsubishi UFJ Trust & Banking and Resona Bank which are not JIAA members as well as those which pension funds manage inhouse.

Nor do the data reveal how much of the growth in assets under management comes from investment returns. However, it is unlikely that any comes from capital inflows since most pension funds in Japan — including GPIF — are now decumulating. That is, they have already tipped into territory where they will forever have a rising number of beneficiaries and a falling number of contributing members.

So the 10.86131bn yen year-on-year rise in funds in asset managers’ stewardship is likely to be composed of investment returns less the amount which retirement schemes have drawn down to cover the difference between their income and expenditure. As previously reported (archive 2015-7-12) the drawdown at GPIF was probably 5.5tr yen.

The fall in mandates also speaks to the decumulation trend and means that all new business must now be won away from other asset managers.

Three firms which have been doing well at just that are Ueda Yagi Securities, Seiryu Asset Management and a seemingly revitalised Schroder Investment Management (Japan).

It is not unusual for the fastest growing firms in the JPID analysis to have an annual growth rate in three digits– usually because they are moving from a very low bases having only entered the market a year before.

However the standout trio this time have managed to keep up a blistering pace for at least two years.

Top 5 govt pension managers by growth at 31 March 2015Ueda Yagi Securities moved from 114th in the overall ranking two years ago to 89th last time and is now 76th with 24.2bn yen spread across 10 mandates, all of them from corporate funds.

Seiryu Asset Management, which has connections with Taiyo Pacific Partners of the US, went over the same time from 112th to 79th so that it now has 20.5bn yen across seven mandates. One of these comes from GPIF and is submandated to Taiyo even though it is for domestic equities.

In the late 1990s and early 2000s Schroder was a much greater force in the Japanese pensions market than it subsequently became. In 2004 it ranked tenth overall with 1,221.4bn yen. It closed last year with 523.5bn yen – but that was double its total for the previous term thanks to one new mandate from GPIF for active domestic equities and two more from other government-run funds.

Since 2002 corporate pension funds have been allowed to hand over to government their responsibility for managing employees’ contributions to a supplementary official scheme known as the daiko. As this trend has grown the market in managing pension assets has became ever more bifurcated.

At 31 March JIAA members were managing 87,797.6bn yen of assets for government customers, up 12.00% year-on-year, and 28,066.1bn yen for companies, a rise of 7.32%. The size of the average mandate from government is still a hefty 337.68bn yen but considerably lower than the 354.71bn a year before.

By contrast – but only by contrast – the size of the average corporate mandate looks puny at 6.24bn yen but as everyone from Sumitomo Mitsui Trust Bank Ltd and BlackRock to Seiryu and Schroders can attest is well worth having.

At 31 March 2015 US$1=119.99 yen, £1 = 178.18 yen, Euro1 =128.88

For details of how to obtain the full study on which this posting is based please get in touch via the ‘ contact’ 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.

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In-house team easily retains No1 slot in GPIF manager ranking

The in-house team at the Government Pension Investment Fund remained GPIF’s biggest asset manager by far in the year ending 31 March 2015 — even after paper issued by the government’s Fiscal Investment & Loan Program (FILP), which it holds to maturity, and the shrinking size of the Fund’s domestic bonds portfolio paper are taken into account.       Text continues below table.

GPIF top 10 asset managers 2012-2015

All the firms who featured in the top ten last time have also retained their positions but further down the ranking matters are not so stable with seven firms appearing in the list for the first time.

An updated table showing which funds manage what assets classes for the fund along with a full overall league table by amounts has just been posted in the GPIF section of ‘Giants’  (see tab to the right 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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GPIF asset allocation correction

The Government Pension Investment Fund has issued a correction to the asset allocation information contained in its latest annual investment report.

While the yen amounts reported as allocated to each segment were correct the percentages for which they account appear to have been wrongly calculated.

The pie chart below thus gives the wrong numbers. For the year ending 31 March 2015 these should be:

Domestic bonds 37.60%, domestic equities 23.04%, international bonds 13.23%, international equities 21.88%, short-term assets 0.61% and FILP 3.65%.

Sorry! I should have noticed this but the posting became entangled in one of the many moods of the software in which the blog is written, making for a delay of some hours and wearing my patience and proofreading time very thin.

 

 

 

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GPIF does well, more detailed information now a must

The Government Pension Investment Fund closed its financial year on 31 March 2015 with a portfolio worth a record 137.5 trillion yen thanks to its best investment performance since 2001 when it replaced the old Nenpuku.

GPIF total assets 2002-2014The world’s largest institutional investor had closed the previous year with assets of 126.6tr yen on which its newly published annual  report shows it made a return of 12.17%. This would have brought total holdings to 142.1tr yen.GPIF investment income ad drawdown 20010-20015

However GPIF now has more

going out in pensions each year than it has coming in via contributions and has to use part of its income to meet its benefits bill. It had previously forecast that the drawdown for this purpose in the 2014/15 year would need to be 5.5tr yen and that seems to have been almost the case.

Its sparkling investment performance was aided by a re-allocation of its portfolio, a boom in local stocks, a decline in the value of the yen which boosted the value of foreign investments and continued shrinkage in its holdings of Fiscal Investment & Loan Program (FILP) paper which were once forced on it by the Ministry of Finance.

Asset allocation has been adjusted over the year towards a new policy mix introduced after both internal and external reviews of the Fund’s operations. All the big shifts now to seem to be in place with little need to do more than opportunistic buying on dips and re-balancing in response to market movements.

Text continues below charts

 Asset allocation financial year 2013                 Asset allocation in financial 2014 year                                                                        (Please note correction in posting above.)

GPIF asset allo YE 2013 & 2014

The new policy mix is: domestic bonds 35% plus or minus 10%, domestic equities 25% plus or minus 9%, international bonds 15% plus or minus 4% and international equities 25% plus or minus 8%. It is from the Japanese bonds segment, which is largely managed inhouse, that any funds necessary to make up the shortfall between contributions and benefits payment are taken.

Domestic equities holdings have risen from 20.8tr yen at 31 March 2014 (when they accounted for 16.47% of holdings) to 31.7tr yen (or 22%) a year later, a rise of 52%. During this time the Nikkei 225 index rose 28.64%.

Foreign stocks have climbed over the same time from 14tr yen (15.6% of the portfolio) to 20.1tr yen (21%) a 43.6% jump. During the period the yen moved from 103.01 yen = US$1 to 119.99yen =US$1 – a decline which would have boosted the value of overseas equities by 16.4%.

GPIF’s long running exit from FILPs continued last year and they are now down to a book value of 5tr yen (or a wholly theoretical market value of 5.2tr) compared with over 30tr yen a decade ago. As this paper matures the proceeds are directed to other investments and FILP holdings should disappear entirely within two to three years (see table at top).

As with its third quarter report, the Fund omits any mention in its annual round up of how performance in the various components of its portfolio measured up to their benchmarks.

Having broken its old asset allocation mold the Fund now needs to tackle transparency and start publishing not just its investment results but a full income and expenditure statement each year.

This also needs to include forward projections of its benefits burden and to show how much it expects to draw down each year to meet its commitments.

It should also publish the result of its five yearly actuarial reviews views in a timely way and think about making these assessments more frequent.

GPIF assumed investment horizon 2During the heated debate on its future the Fund said that in about 10 years time it would enter a period in which contributions outweighed benefits before the current position reasserted itself some years later (see archive November 2014 Investing pensions: Plus ça change, plus c’est la même chose).

It produced no evidence for this assertion and the demographic data do not support it.

GPIF has often said that it will not invest in hedge funds until they become more transparent but while its present allocation to ‘alternatives’ is 0% that can grow within the bounds of the current policy mix to 5%.

More openness from within will help money management firms to design products tailored to the Fund’s needs and for which it can strongly suggest the reporting standards required.

The three tables under ‘The Giants’ tab above showing which asset management firms handle what for GPIF are up-to-date at 31 March 2014. They will shortly be replaced by those with newer statistics.

The large fall in the Fund’s allocation to domestic bonds saw external mandates for this segment reducing while the rise in allocations to Japanese equities brought Daiwa SB Investments and Schroders Investment Management (Japan) onto the roster.

© 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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Corporate stewardship reality lags far behind propaganda

For all the lofty talk of new approaches to Japanese corporate governance, with the appointment of independent directors and other ‘stewardship’ moves, down on the ground little is changing as old Japan finds ways to subvert progress.

Last week the Asahi Shimbun newspaper published the results of its survey of Nikkei 225 index companies which showed that retired high ranking civil servants now occupy 20% of ‘independent’ directorships.

The newspaper noted that the bureaucrats ‘have little or no corporate management experience’ to which  Hajime Yamazaki, visiting researcher at Rakuten Securities’ economic research institute, added that ‘the question remains whether they can contribute to improving the earning power of the company’.

The reverse is certainly true since each independent director receives a stipend of 10 million yen a year to attend one meeting a month.

Meanwhile shareholders hoping to get to as any annual general meetings as possible are stymied by 41% of the 970 companies listed on the Tokyo Exchange still holding their gatherings on the same day – this year 26 June.

As the country’s – and the world’s — largest institutional investor, the Government Pension Investment Fund is closely watched for clues about any impending asset re-allocation moves. In recent years the Fund has been a fraction less obsessively secretive than it once was but its current president Takahiro Mitani now seems to regret that.

According to the Nikkei, Mr Mitani has come to feel that ‘The quarterly disclosures of our portfolio may be too frequent’  because they arouse ‘wild speculation’ about  possibly impending market moves.

Since such speculation starts with sources in government when it wants to talk up the market, the obvious solution is to gag them   and make GPIF more open – not shift to a less regular reporting pattern.

Media owners too have their part to help in helping improve journalists’ understanding of GPIF and asset management generally. Today reporters are sometimes little more than cyphers for civil servants or firms talking their own book.

© 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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DB scheme numbers down & membership lower, but assets up

Amplification: Neither the posting below nor the source material on which it is based make clear that the yen amounts mentioned are solely those which life insurers and trust banks manage for their pension fund clients in pooled accounts. The numbers thus exclude the around 100,000+ billion yen in segregated accounts provided by investment advisory firms. Life cos and the trust banks nonetheless see their role as sokanji as extending to segregated accounts to which they provide such services  as custody.

Correction The original also wrongly stated that: ‘The figures do not include the 13,000+ covenant-type defined-benefit plans’. The figures do include those plans. ___________________________

Developments in that part of the corporate pension plan segment made up of Employee Pension Funds and other defined-benefit schemes followed a familiar path in the year ending 31 March 2015. Figures collected and published by the Life Insurance Association of Japan (LIAJ) show the number of scheme sponsors falling modestly along with the total number of members served but assets under management rising.

Text continues below tableFund schemes and EPFs at 31 March 2012-2015

There are several reasons behind the long-term decline of the number of schemes and their memberships.

The government is encouraging closure of those EPFs the bulk of which are now multi-employer arrangements covering a single industry in individual prefectures.

Some, but not all, of these dissolved schemes are replaced by either ‘fund’ or ‘covenant’ DBs, or by defined-contribution (DC) plans. At the same time a number of fund DBs are themselves being replaced by covenant DBs and some companies are grouping the retirement schemes of subsidiaries into a single fund – with Hitachi Ltd a notable case.

Moreover, as the population shrinks there are fewer people employed and new companies see little reason to set up DB funds of any kind.

The difference between ‘fund’ and ‘covenant’ DBs is in how they are governed which, in turn, depends on their previous form.

Fund DBs are reconstituted EPFs and have an existence separate from that of the sponsoring company. They are also required to have a sokanji, or organiser, a trust bank or life insurance company which is appointed when they were established and will stay with them for life.

Covenant funds are mostly former Tax-Qualified Plans (TQPs) which were very loosely regulated not by the Ministry of Health, Labour and Welfare, as they are today, but by the Ministry of Finance. They are managed mostly by corporate personnel or treasury departments and usually pay lump-sum benefits. Some of them have sokanji but they are not required to do so.

Only a dozen institutions are allowed to fulfill the sokanji role which includes acting as clients’ main custodian and managing much of their money in pooled accounts. They can also be formidable gatekeepers when it comes to letting other asset managers near their customer’s business.

By fiat smaller funds sign up with life cos while the bigger firms must go to trust banks.

As the LIAJ figures show, at 31 March 2015 this had put 9,000+ schemes, with combined assets of almost 16 trillion yen, in the arms of the insurers while just over 4,000 plans, with assets of 73.5 trillion yen, were with trust banks. All told assets rose by 1.43% year-on-year.

© 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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More domestic equities & foreign investments life co portfolios

The domestic stock holdings of Japan’s 42 life insurance companies hit 6.2% of their portfolios at the end of the financial year on 31 March 2015 – the highest since 2009 when Japan Post Insurance joined the Life Insurance Association, which publishes the numbers, and tipped aggregate holdings further towards domestic bonds.

In value terms the companies’ equities portfolios were 25.89% up year-on-year and 8.88% up quarter-on-quarter. The annual gain did not keep pace with the 28.64% rise in the Nikkei 225 stock index but that the rise continued into January-to-March, when the Nikkei fell, suggests that the gain came from actual buying, rather than revaluation.

Text continues below tablelife cos holdings at 2015-3-31

Japan Post Insurance has not yet published its annual report for the 2014/15 financial year but if its allocation to domestic equities changed during the period by as little as that of sister institution Japan Post Bank (see story immediately below) then the stock holdings of other companies in the sector may by now be at or near the record 7.3% for which they accounted in 2008

The 19.25% rise in the value of foreign securities holdings must also be seen in light of the fall in the value of the yen against the dollar which makes for translation gains of over 16% year-on-year. The climb is nonetheless significant.

© 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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