Post Insurance and Post Bank portfolios barely budge in Q1

The value and disposition of Japan Post Bank’s and Japan Post Insurance’s investment portfolios barely budged in the first quartet of the 2016~2017 financial year as shown below.japan Post Bank & Insurance securities portfolos Q1 2016

 

 

 

 

 

According to a subsequent Bloomberg story quoting Naohide Une, ‘managing director of the unit that oversees hedge fund allocations’, Post Bank is considering investment in smaller or newly created Asian vehicles of this type.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

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General insurers follow life cos into cash and foreign securities

At 23.1 trillion yen the value  of Japanese general insurance companies’ securities holdings were 1.9% lower at 31 March 2016 than a year earlier, according to their industry body.  Over the same period the amount they held in bank deposits rose 83.4% to 1.7tr yen, to account for the largest proportion of such holdings seen in recent years.

The numbers have some similarities with those of the 15 times larger life insurance sector whose results were covered on this blog on 15 June (see archive Cash up, local equities down in Japanese life cos’ portfolios).

The 23.8% rise in general insurers’ foreign securities holdings (a number which is not disaggregated) rose much more steeply than the 2.6% jump at their life co counterparts to 23.7% of  portfolios. This came despite the yen’s 6% rise versus the US dollar over the year — a move which diminishes the value of overseas investments when they are converted back to yen.

Japanese general insurers' assets 2016-3-31

 

 

 

 

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

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Chikyosai report provides no support for whales’ stock buying

The pension fund of the Mutual Aid Association of Prefectural Government Personnel (地方職員共済組合) had investments assets of 2,437 billion yen at the end of the financial year on 31 March, its newly published annual investment report of reveals.

Usually known as Chikyosai, a contraction of the romanised version of its name, the fund is one of several pubic sector retirements plan which put part of their assets into the stewardship of the Pension Fund Association for Local Government Officials (地方公務員共済組合連合会, usually known as Chikyoren). For details of this arrangement please see archive 8 November 2012.

The Chikyosai split is 66%:33% with Chikyosai inv at Chikyoren1,634 billion yen remaining in its hands and 802 held by Chikyoren. The latter is allocated 41.8% or 336bn yen to domestic bonds, 18.1% or 145bn yen to domestic stocks, 12.3% or 95bn yen to foreign bonds, 16.5% or 132bn yen to foreign stocks and 11.3% or 91bn yen to short-term.

Chikyosai inv itself

The 40%+ allocation to domestic bonds is perhaps surprising given that almost 40% of the funds directed by Chikosai itself are invested the same way with the remaining 60% going into short-term holdings.

This highly liquid position is necessary to a fund which is past its tipping point so has to draw on its reserves to meet a fast-growing annual benefits bill. It is the longer term funds which are managed by Chikyoren.

The report does not say whether any part of the Association’s bond holdings are driven by so-called duty investment which for many years required it to make hefty investments in government paper.

All the large mutual aid associations recently undertook to bring their portfolios in line with that of the Government Pension Investment. However it is doubtful that this can be applied to the money kept in Chikyosai’s stewardship since it already has more going out in benefits each year than coming in via contributions and the money it keeps to hand is needed to pay pensions.

If other Chikyoren constituents are also shown in their forthcoming yearly investment reports to need to the lion’s share of their funds for immediate payouts that would put a very big dent indeed in stockbrokers’ oft repeated argument that MAA ‘whales’ will be buying up Japanese shares and boosting, or at east supporting, the stock market.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

 

 

 

 

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Robots only running to stand still – new businesses needed

Japan’s dire demographics dictate that the country’s workforce is set to shrink for decades to come which, in turn, means its companies will need to produce spectacular productivity gains every year simply to maintain their current level of output.

While fewer people of workforce age means a smaller domestic market to serve in one age group, the millions entering retirement need companies to go on growing so as to pay the taxes which play a large part in supporting them.

This has caused manufacturers to make heavy investments in robotics and some service sector businesses are by now not far behind. But the focus on automating old processes in existing industries seems to have blotted out thinking about what new goods or services will power the economy in future.

A thoughtful new research paper* from the Japan Centre for Economic Research suggests that if the country were able to implement the level of information and communications technology (ICT) applied in the West “productivity [would] improve dramatically through the creation of new value”.

It notes, however, that ICT investment by companies in Japan is “only half that made by companies in the UK and the US” and suggests that local firms “allocate their ample cash reserves to ICT investments.”

If the paper has a fault it its failure to note that many of the entities driving the trends to which it points, such as Uber and Air BnB, did not arise in corporate settings but with adventurous entrepreneurial spirits backed by equally adventurous venture capitalists. Both are in short supply in 21st century Japan — partly because of its demographics – which frowns on individualism and will need to find collective means of achieving its ends.

Sticking with their calling as economists the authors model the impact they calculate that increasing investment in the software which powers ICT would have on the nation’s productivity.

The result is below and shows that the difference between real GDP with and without such investment would be a whopping 70 trillion yen by 2030.

JCER ICT investment and producivityThe paper is just four pages and well worth reading. It is here.

*Potential of investments in information and communications technology: GDP boost of 70 trillion yen by fiscal year 2030. Using ICT for interaction with customers is key.  by Keisuke Takachi and Toshiya Jitsuzumi

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

 

 

 

 

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Invisible man espies Japan Post Bank mandate awards yet gain

According to US publication Pensions & Investments ‘Japan Post Bank has selected Goldman Sachs Asset Management, UBS Asset Management and Blackstone Group to manage its first hedge fund-of-funds allocations, according to sources who declined to be named’.

‘A Japan Post Bank spokesman conceded that the firm is “preparing for investment in hedge funds,” but declined to provide further details, or confirm that GSAM, UBS and Blackstone had been selected.

Spokesmen for UBS, GSAM and Blackstone declined to comment.

‘Industry veterans, who declined to be named …’

This is the second time (see archive 8 March) that P&I has reported on Bank of Japan’s imminent award of hedge fund-of-funds mandates using only anonymous sources. No other medium has carried stories on the matter.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

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Insurance better buffer against crises than cross shareholdings

Hands-on risk-management by senior company executives who are also skilled in acquiring appropriate insurance cover provides a better buffer against crisis than maintaining cross shareholdings with friendly firms and counting on them to ride to the rescue, says a newly published discussion paper by the Foreign Non-Life Insurance Association of Japan.

The five-page document sets this corporate governance issue in the wider context of the economic growth and security and notes that the management of Japanese companies is typically not structured to consider the risk-mitigation solutions that insurance can already provide.

Recovery from natural disasters is one area where the industry can help and the paper points out that while only around 17% of the losses from the Great East Japan Earth in 2011 were recoverable from insurance the proportion for the Christchurch, New Zealand, earthquakes in the same year was 75%.

The paper proposes dialogue on action in three areas: Supporting stronger corporate governance; fostering a culture of risk management and leveraging best industry practices.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

 

 

 

 

 

 

 

 

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PFA slimmed down by markets and pensions payouts

pension-fund-association logoAt -2.5% the Pension Fund Association’s return for the year ending 31 March 2016 on its 11.7 trillion yen of assets was the worst for six years, a just-published preliminary version of its annual report reveals.

The Association manages the world’s 25th largest pool of retirement savings which is Japan’s third largest, according to the latest figures available from Willis Towers WatsonPFA yield to 2016-3-31. Originally set up 50-odd years ago to manage the accumulated pension assets of staff moving to other companies — which would otherwise be have been orphaned — the PFA has been obliged to keep pace with change and is now split in two.

The main fund began the 2015/16 financial year with a portfolio worth a trillion yen more than at the end but this is due more to drawdowns to fund benefit payments than poor investment returns.

Asset allocation in this part of the pool tipped during the year towards bonds which rose from 54.4% of the portfolio to 57.8%, suggesting that it is comfortably funded.

The PFA has no contributions PFA asset allocation etc 2016-3-31income to deal with and in 2010 its asset allocation was put on has autopilot. Under this mechanism any funding level below 100% dictates an equity:bonds split of 40%:60%. With every 5% improvement the equities component falls by 5%.

The PFA publishes fewer details of its second, smaller pool which invests the assets remaining when an Employee Pension Funds is been closed or dissolved.

Once the gold standard of Japanese company retirement plans, EPFs were also responsible for investing contributions to a supplementary government scheme known as the daiko. After the stock market collapse of the late 1990s, this arrangement became burdensome so companies were allowed to had over the assets they held under it to the Government Pension Investment Fund and the corporate pension funds regime was re-organised around this move.

However the daiko contributions already made by employees changing jobs moved with their accumulated pension pots to the PFA.

The list of asset management firms handling the Association’s portfolio does appear until the final version of its annual report which comes out around October (see under ‘The Giants’ tab at the top of this page for last year’s list). They include the PFA itself which manages a large part of its bond holdings inhouse.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

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GPIF behemoth seeks to harness the power of consultation

The Government Pension Investment Fund is embarking on two consultation initiatives designed to strengthen the part GPIF plays in the investment chain and, through interactions with other players, help set the Japanese economy on a path to sustainable growth.

The twin moves are announced in a statement which is notable for its English-language version including the term ‘fiduciary duty’, a concept fundamental to investment regimes elsewhere but of which Japan still lacks a legal definition.

Text continues below illustration

GPIF two new fora

A new Business and Asset Owner’s Forum is the result of the Fund receiving a proposal from ‘many’ companies, including Omron Corp, Eisai Co and Nissan Motor Corporation, to meet regularly with it ‘as an asset owner’ (and presumably one which holds their shares).  The first such gathering will be in September and about ten companies are expected to attend. As the Fund appears to be the only owner involved the group it might be better named the Business and GPIF Forum.

The Global Asset Owners’ Forum to be set up later this year will consist of around 20 asset owners including:

From North America CalSTRS, CalPERS, State Board of Administration of Florida, State of Wisconsin Investment Board, The Regents of the University of California and the Ontario Teachers’ Pension Plan.

From Europe the UK’s Universities Superannuation Scheme and Legal & General Investment Management and from the Netherlands PGGM and APG.

GPIF notes that these players have already developed sophisticated approaches to ESG investing [in which environmental, social and governance considerations are systematically included in stock selection] and hopes to utilize their expertise in that regard in developing discussions with its own fund managers and non-Japanese asset owners.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

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Municipalities get 6 managers for active equities, 2 for passive

The National Federation of Mutual Aid Associations for Municipal Personnel, often known as Shichousonren, has announced the selection of the following firms to manage its active domestic equities portfolio for which the benchmark is the TOPIX index (including dividends).

Capital International KK (subcontracted to Capital International Inc), Nikko Asset Management, Nomura Asset Management, Mizuho Trust & Banking, Sumitomo Mitsui Asset Management and Sumitomo Mitsui Trust Bank.

The award to Sumitomo Mitsui Trust Bank includes an unknown amount for which no benchmark is stated as does an award to Nissay Asset Management.

Mandates for passive equities management have gone to Mitsubishi UFJ Trust and Banking, for which the benchmark is the MSCI Japan Minimum Volatility Index (dividends included), and Resona Bank for which the yardstick is the FT RAFI Japan 350 QSR (dividends included).

The values of the mandates have been made known.

Only Sumitomo Mitsui Asset Management is new to Shichousonren’s manager roster.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of 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 and a link provided to the original text on that site.

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

 

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GPIF to publish list of equities held a year ago as ‘first step’

According to an article in the Yomiuri Shimbun when the Government Pension Investment Fund publishes it annual report for the year to 31 March 2016 on Friday of this week it will also make available a full list of its stock holdings a year earlier. This ‘first step’ will be followed by publication of the list of equities held at 31 Mach 2016 before the end of this year.

© 2016 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. The material published  here 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 and a link provided to the original text on that site.

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