GPIF investment advisory committee sticks up for principles

The investment advisory committee of the Government Pension Investment Fund, the world’s largest institutional investor, stormed the moral high ground yesterday when it issued a statement of the principles governing investment of its 137 trillion yen hoard. Then came a lengthier description of those principles as well as a stewardship code.

The documents are here in Japanese and here in English.

The days of the investment committee its current form may be numbered but in spelling out so coherent a philosophy it has set  benchmark that any successor body will have to more than than meet.

The first principle states:

“Our overarching goal should be to achieve the investment returns required for the public pension system with minimal risks, solely for the benefit of pension recipients from a long-term perspective, thereby contributing to the stability of the system.”

The “should” and the “solely” are interesting. The first implies that what is described is an ideal state (otherwise it would say “is to achieve”) and the second rules out from that ideal state the pursuit of policies on the grounds of national interest.

This seems to override the argument, often hinted at by Prof Takatoshi Ito, that GPIF should invest to further national economic growth because without that growth no pensions could be paid. The talkative Prof Ito chaired the government-appointed Panel for Sophisticating the Management of Public/Quasi-public Funds when he was dean of Tokyo University’s Graduate School of Public Policy. He is now at Columbia University Columbia University’s School of International and Public Affairs.

The second of the Fund’s principles gives its “primary investment strategy” as “diversification by asset class, region, and timeframe” with the “description” noting that overseas investment can provide the benefits of growth beyond Japan, even though it involves foreign exchange risks.

Prof Ito’s panel proposed replacing what it aooeared to see as one-man rule by GPIF president Takahiro Mitani with an investment board made up of those with expertise in the field.

In what way this differs from the Fund’s investment committee has  never be wholly clear though there was some implication that the new body would have more, formal authority.

Appointments to the committee are typically for two years though when the current line-up was announced in April 2014 there were suggestions that it might sit for only 12 months given the ongoing discussions about the Fund’s future.

For the current composition see archive 22 April 2914 Government Pension Investment Fund’s new investment panel.

© 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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State actors’ standing in Tokyo stock market looms ever larger

In an burst of either welcome frankness or astonishing naivete the Nikkei today confirmed that the Japanese government is once again engaged in stock market price-keeping operations — this time via the country’s central bank.

The Bank of Japan, the Nikkei notes, “… frequently steps into the market and buys 30 billion yen to 40 billion yen worth of stocks when equity prices falter in the morning. Its purchases Tuesday [24 March] reached 35.2 billion yen, underpinning a market that showed signs of a morning struggle. The bank has carried out 20 such operations so far this year.”

The Bank of Japan’s share portfolio now stands, according to the article, at around 10 trillion yen or about 2% of Tokyo Stock Exchange value. That makes it second only to the Government Pension Investment fund which at the end of December held domestic stocks then valued at 27.1tr yen.

This gives government agencies great market power even before the three giant public service pension funds start fulfilling their pledge to match GPIFs asset allocation and shifts what translates to 3.6tr yen into stocks.

Add in the portfolios of the state-owned Japan Post Bank and Japan Post Insurance and an already very considerable tally doubles to within reach of 10%.

If it looks like PKOs …

The Nikkei puts the BoJ purchases into the context of quantitative easing but to long-time markets watchers it is all too reminiscent of the so-called price keeping operations (or PKOs) of the early 1990s when pension funds were also the chosen vehicle.

That was before asset managers were allowed to handle corporate pensions business which had, rather, to be handed to trust banks or life cos which were dependent on government for their licences and did as they were told.

In this period company pension schemes held proportionately more of the market than GPIF because they still handled the investment of contributions to a supplementary government scheme known as the daiko — a job that subsequently passed to the Fund.

In a 2002 paper published by Columbia University’s Center on Japanese Economy and Business, Juni Narita reported that: “When the Nikkei Stock Average occasionally dropped below ¥17,000, a fear spread over the markets that the low level of stock prices would trigger off financial instability”.

Following the letter

Thus each time the market hit that level in the period from August 1992 to November 1993  the Japanese government “stimulated the trust banks and the other financial institutions … to buy more stocks.”

“The trust banks and the asset management companies* did buy stocks in the spot market …  However, at the same time, some of them hedged by selling stocks in the futures market on the expectation that stock prices would decline further. As a result of this, the prices of the futures market and the spot market synchronously crashed. PKO could not accomplish its purpose in the end”.

Presumably the government sees the Bank of Japan as a more reliable partner. So, it seems, do investors.

Junichi Makino of SMBC Nikko Securities is reported as telling the Nikkei that: “The BOJ’s role of providing support to the market is giving investors a sense of security”.

Confidence in intervention or in the market?

But having confidence that the government will intervene — which inevitably creates distortions —  is not the same as having confidence in the market.

Moreover the government, as embodied in Prime Minister Abe, and the Bank of Japan, in the shape of Governor Kuroda, seems increasingly to be two different things.

As the Japan Times told readers  on 22 March, the Abe-Kuroda ‘honeymoon’ risks being soured by fiscal friction partly because “[Any] delays in fiscal reform are … likely to leave the BoJ with a bloated balance sheet, already equal to over 60% of GDP, for longer than it wants.”

Meanwhile bringing change to GPIF  has not proved to be the pushover its critics thought and the planned replacement of its chief executive by an committee in about a year’s time will probably make it even more ornery from government’s point of view.

*Asset management companies at this time were largely subsidiaries of securities firms and managed ‘investment trusts’ — i.e. mutual funds.

© 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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Market movements alone make big shifts in pensions portfolios

For the first time since 2007 the close of the third financial quarter on 31 December saw segregated pension accounts at asset managers holding more money in domestic stocks, at 45,765.1 billion yen, than in Japanese bonds, at 39,641.0bn yen. The total was 222,042.1bn yen.

The numbers come from the returns which members of the Japan Investment Advisors’ Association (JIAA) file with it every quarter. They need to be read with caution and keeping several caveats in mind – especially in light of the boo boos reported in the posting below.

Retirement schemes dominated the 155,817.0bn yen of funds sourced from Japan with 82,056.6bn yen from public pensions, down 3.61% on the previous quarter, 28,212.4bn from corporate plans, up 4.14%, and the remaining 45,448.0bn yen from unspecified client types. By contrast of the 29,990.2bn yen from overseas clients only 2,542.4bn yen came from pension funds.

GPIF self-managed amounts excluded

After an initial breakdown by type of client, the JIAA disaggregates the grand total only by type of investment. It provides no breakdown by customer then by type of investment. However, it is likely that money sourced from abroad is invested only in Japanese markets.

Discerning trends is also complicated by the omission of funds which investors manage inhouse and thus the exclusion of 26 trillion yen in passively manage domestic bonds which the Government Pension Investment Fund does for itself (GPIF). This amount alone would sway the balance of overall portfolio holdings back in favour of bonds.

Also excluded is Japanese pensions money managed in pooled accounts at life insurers and trust banks (which is reported via a different channel) and amounts invested via segregated accounts at Resona Bank and Mitsubishi UFJ Trust & Banking which are not JIAA members.

So bearing all that in mind …

Japanese bonds held in segregated accounts fell during the quarter by 17.2% from 47,913.5bn yen to 39,641.0bn yen, a difference of 8,272,5bn yen. Japanese stocks rose by 10.27% from 41,503.4 to 45,765.1bn yen, a difference of 4,261,7bn yen but the Nikkei 225 stock index also rose by 10% in the period.

Much of the proceeds from bond sales will have been used to meet the massive monthly benefits bill which GPIF faces now that it has more going out than it has coming in through contributions. (The actual payments may have come from realizing bonds managed inhouse with that pool then topped up by transfers from externally managed funds.)

Away from the home front the biggest shift is into US bonds. Such holdings rose 11.48% to 20,578.8bn yen but 9% of that will have come from a contemporaneous decline in the value of the Japanese currency versus the American unit.

US stocks up on currency and prices

The same is true of investments in US equities which rose 19.05% to 17,216.2bn yen with valuations additionally benefitting from a rise in US stock market prices– as seen in a 7% jump in the Dow Jones Industrial Average.

Also noticeably up is investment in Japanese REITs which, after four consecutive quarters of decline, rose 10.2% to 3,527.9bn yen.

JIAA members asset allocation at 31-12-14The table alongside shows how asset allocation looked at 31 December 2014 and a year earlier

For the full disposition of portfolios see page 8 Assets Under Management by Country and Region in the December 2014 numbers here. Beware! These figures are in that much-loved Japanese unit hundreds of millions

For a breakdown of the asset management business by client type (domestic, foreign, pensions, other) see page 2 of the same document. The warning here is that the subtotals often do not make sense. This is because they include more that what is shown in the disaggregated details.

© 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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Oops! Bloomberg makes a bit of a booboo on BoJ numbers

Flow of funds figures just published by the Bank of Japan show that at 57,209.8 billion yen on 31 December 2014 the value of  Japan Government Bonds and FILP obligations held by public pension funds was 4,796.6bn yen lower, a drop of 5.1%, than three months earlier when they were 62,006.4bn yen. This category of retirement scheme includes both the Government Pension Investment Fund and the civil servants’ nest eggs.

During the same period the value of the funds’ domestic equities holdings rose from 31,283.3bn yen to 35,293.2bn yen and of foreign securities from 46,878.7bn yen to 53,299.5bn yen (see abbreviated table at foot).

A Bloomberg story headlined ‘Japan Pensions Sell Record $46 Billions Bonds to Buy stock’ misguidedly represents these rises as wholly attributable to purchase transactions in the third quarter.

They were not.

Part of the rise in the value of local equities held is attributable to the rising stock market while changes in the foreign exchange rate impacted the value of overseas investments. [For more see coverage of GPIF’s third quarter report Returns well up at GPIF, transparency down (a bit), archive 28 February.]

Additionally, while government bond holdings did indeed fall by the reported amount, GPIF will have used much of the cash so raised to pay benefits. This is why the Fund keeps so much of its portfolio in JGBs.

The same statistics also show that corporate pensions’ holdings of government bonds were steady while their investments in Japanese shares rose 5.8% to 12,648bn yen and in foreign securities by 4.6% to 29,930.1bn yen.

Somewhat surprisingly the Bloomberg story does not address the huge wodge of public pensions money held as ‘Deposits with the Fiscal Loan Fund’ which experienced the biggest drop of all — falling 25%,  or by 2,956bn yen, to 8,506.6bn yen.

BoJ 2014 Q2&3 nos

© 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 and Japan Post Bank: the top jobs nobody seems to want

Takahiro Mitani, president of the Government Pension Investment Fund, confirmed today that he will be staying on in the job after the end of his five-year term on 31 March because ‘I can’t just leave things up in the air if they do not have anyone to take over’.

Japan Post Bank has the same problem. Here Yoshiyuki Izawa, who is stepping down at the end of March, will be replaced temporarily by Japan Post Holdings president Tazi Nishimuro because the currently state-owned behemoth has, according to Reuters citing ‘sources with direct knowledge of the matter’, ‘not been able to find a successor’.

GPIF recently set a new asset allocation policy which at government’s behest has it de-emphasising public sector bonds and shovelling money into the stock market with predictable results.

The portfolio of Japan Post Bank, which is due to go public later this year, is set to take a similar track (see archive 18 February 2015 Post Bank to move into equities, beefs up asset management). 

Anyone for politics?

© 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 investors to buy $300bn of US Treasurys by end 2017

(Bloomberg) — Back in the 1980s, the billions of dollars that the Japanese plowed into U.S. government debt reflected the Asian nation’s burgeoning economic might.

Now, they’re at it again, only this time it’s to eke out any return they can.

Yields on Japanese debt have been pinned near zero ever since the Bank of Japan embarked on its latest attempt, in April 2013, to end the two decades of stagnation that followed those go-go years. Europe isn’t much of an option, as yields turned negative this year on the region’s own quantitative easing.

So why the U.S.? For one, with the Federal Reserve poised to raise interest rates, Treasuries offer the highest yields among debt from the world’s most-industrialized economies. Then there’s the dollar, whose meteoric rise against virtually every currency has made U.S. assets even more appealing. HSBC Holdings Plc says Japanese investors may funnel $300 billion into Treasuries over the next two to three years, double the pace of the nation’s purchases since 2012.

“The BOJ is crowding out private investors,” said Yusuke Ito, a fund manager at Mizuho Asset Management, which oversees $33 billion in Tokyo. “They have to find alternatives.”

Mizuho’s overseas bond unit, which stepped up buying of Treasuries in mid-2014, has signed up more clients looking for higher-yielding alternatives to Japanese debt, he said.

Japan first began to exert its influence in the U.S. government bond market more than three decades ago, when its booming export-driven economy produced trade surpluses that it then plowed into Treasuries year after year.

Creditor Nation

Japan has since built a stake of $1.23 trillion, making it America’s second-largest overseas creditor, just behind China’s $1.24 trillion.

For the U.S. government, maintaining Japanese demand in the $12.6 trillion market for Treasuries is more important than ever, particularly after China pared its own holdings last year by the most on record and as the Fed prepares to raise rates.

The good news is that Japanese purchases are poised to accelerate. Of the $500 billion that investors will pull from Japan’s debt market to put abroad through 2017, about 60 percent will flow into Treasuries, said Andre de Silva, HSBC’s Hong Kong-based head of global emerging-markets rates research.

Much of the allure has to do with the U.S. tightening monetary policy at a time when more than a dozen nations around the world are cutting rates or increasing stimulus to boost growth. The European Central Bank this month followed Japan in buying government bonds to pump money into its economy.

Yield Premium

As a result, 10-year Treasuries yielded as much as 1.2 percentage points more than the average for Group of Seven countries last week, the biggest premium since 2006. Compared with German bunds, the advantage reached the most in more than 25 years. Yields on the 10-year note ended at 2.11 percent.

“U.S. Treasuries are more attractive than other markets,” Yoshiyuki Suzuki, the head of fixed income at Fukoku Mutual Life Insurance Co., which oversees about $52 billion, said from Tokyo. Fukoku has lifted its foreign bond holdings, composed mostly of Treasuries, to more than 20 percent of assets at the end of December, from about 18 percent a year earlier, he said.

And it’s not as if investors in Japan have much choice at home. Under Governor Haruhiko Kuroda, the BOJ is buying 80 trillion yen ($659 billion) of debt a year, pushing down yields and constricting available supply.

The BOJ already owns more than 20 percent of Japan’s government bonds. At least 60 percent of the $8.28 trillion market, including notes due as far out as a decade, yield less than 0.5 percent, data compiled by Bloomberg show.

Forced Out

They are forcing everybody out of JGBs and into something that’s higher yielding,” John Gorman, the head of dollar interest-rate trading for Asia and the Pacific at Nomura Holdings Inc., Japan’s largest brokerage, said from Tokyo. Treasuries will be among the biggest beneficiaries, he said.

Japan Post Holdings Co., the largest owner of the nation’s bonds after the central bank, and Government Pension Investment Fund, are already making the shift. Together, they hold about 218 trillion yen of local debt, equal to $1.8 trillion.

The banking unit of state-owned Japan Post increased its holdings of dollar-denominated debt more than 40 percent to 7.12 trillion yen in the fiscal year ended March 2014.

GPIF plans to boost overseas bonds to 15 percent of its 137 trillion yen in assets from 11 percent to boost returns, and trim its allocation to Japanese debt. Spokesmen at both companies declined to comment on their holdings of Treasuries.

Buying Power

Hideo Shimomura, the chief fund investor at Mitsubishi UFJ Asset Management, which oversees $66 billion, says he’s not about to dump his Japanese bonds for Treasuries. That’s because the central bank’s bond buying will cause prices to appreciate and more than make up for the low interest payments.

“The BOJ purchases are powerful and will completely support the market,” he said from Tokyo. “People may come back to JGBs. I don’t think the market will become bearish.”

Japanese government bonds, which have fallen in March and February, posted their biggest annual returns since 1999 last year, index data compiled by Bank of America Corp. show.

The Fed’s rate increases, which traders anticipate will start by September, may also leave Treasury investors vulnerable to losses. Forecasters surveyed by Bloomberg say 10-year yields will rise to 2.7 percent in the coming year as the Fed boosts borrowing costs, based on the median estimate.

If that happened, it would result in a loss of about 2.4 percent for note holders, data compiled by Bloomberg show.

Dollar Yen

The dollar’s advance against the yen may far outstrip the losses from any rise in yields.

For yen-based investors, the U.S currency’s appreciation boosted returns on Treasuries to 17 percent over the past six months, the most among 26 bond markets tracked by Bloomberg and the European Federation of Financial Analysts Societies.

The greenback is forecast to climb 4.6 percent further against the yen in the coming year.

“Investors will buy high-yield and high-quality bonds,” Hideaki Kuriki, a fund manager at Sumitomo Mitsui Trust Asset Management, which oversees $40 billion and bought U.S. 10-year notes this month, said from Tokyo. “That’s Treasuries.”

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net

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Long struggle for GPIF’s soul gets longer

Yasuhisa ShiozakiMinister of Health, Labour & Welfare Yasuhisa Shiozaki (pictured left) will announce this week that Takahiro Mitani’s contract as head of the Government Pension Investment Fund will be extended when it expires on 1 April Reuters reports, citing officials said to be well informed on the matter.

It is not clear whether the appointment will be for a further five years or a shorter period.

Following implementation of sweeping shifts in the Fund’s  asset allocation, made at the Abe Government’s behest, Mr Mitani had been expected to step down  to facilitate changes in GPIF’s governance

The nature of those  changes is now at the centre of a fight inMitani GPIF which the arguments are being obfuscated by the deployment of terms such as ‘independence’ and ‘transparency’ by people who have no experience of working to such ideals but know that they have some sort of resonance with the public.

All told there is a good deal of tatemae obscuring the honne.

Health Ministry officials feel they have done a good job as stewards of the world’s largest pension fund and at the same time as overseen implementation of far-reaching changes to the country’s corporate retirement schemes system — including winding up or reconstituting 60,000 funds which had previously been only very lightly regulated (when they were regulated at all) by the Ministry of Finance.

That said, the Ministry — and its offshoot the Pension Fund Association — seem to feel that only they can understand the complexities of what they oversee and therefore making information on it available to outside eyes is downright dangerous.

Yet they resist simplifying the regulations and seem to employ as many people to refuse to make information available as they do to collect it — though such data are routinely available elsewhere

Nonetheless GPIF has done government’s bidding on asset allocation and to the MoHLW mind to now have ultimate responsibility for the Fund taken away from it would be a further loss of face it cannot tolerate. Any hint that the Ministry of Finance would gain from the shift could only intensify the war.

Yasuhisa Shiozaki is one of the government’s more interesting figures (see archive 15-9-2014 Will Shiozaki use GPIF’s clout to see off cross shareholdings?). He is said to have given up his hopes of being Prime Minister but knows how to play a long game and seems to be doing just that with his civil servants.

© 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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Call for Japan to set up sovereign fund – not based on GPIF

“Japan is the world’s largest net creditor, but has managed its financial portfolio in a far from optimal way, much to the detriment of its long-term prosperity. Rather than keeping its trillion-dollar hoard of foreign exchange reserves in low-return … U.S. Treasurys, the Japanese government should consider establishing a sovereign wealth fund to diversify into real assets, such as U.S. infrastructure, real estate and publicly traded equities”. So says Peter Tasker, long-time Japan analyst at Arcus Investment, in today’s Nikkei.

Such a move would also be consistent with Japan’s demographics which should see the nation — like so many of its companies and financial institutions – pushing into growth opportunities abroad given that those at home are becoming increasingly limited.

© 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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Low yielding JGBs push institutions into real assets

When the Japan Exchange Group launches a market for infrastructure funds next month, local pension schemes will gain access to a promising alternative to low-yielding, 10-year government bonds – and the world will gain access to yen-denominated participation in building and owning real assets at home and abroad.

The development follows a doubling last year in the value of real estate trusts offered in the private market and it could open up new lines of business for Japan’s giant trading companies — whose knowledge of world demand for, and supply of, infrastructure is second to none.

The Tokyo Stock Exchange Study Group on the Listed Infrastructure Market was set up in September 2012. At that time its work was portrayed as part of a plan to help the city become a leading international financial centre by providing a new arena for the deployment of Japan’s huge pool of capital. In May 2013 the Group published a 40-page report in Japanese and a one-page outline in English.

Infrastructure trusts, funds and foreign

Both reports list three types of entity as qualified for listing: infrastructure trusts, infrastructure funds (modelled after existing Japanese REITs and the holdings of which could include the beneficiary certificates of infrastructure trusts), and foreign funds (i.e. with assets abroad).

What the Nikkei characterizes as a month-long ‘comment period’ on the new market opened on Tuesday 24 February 2015.

At that time condominium developer Takara Leben was reportedly ready to enter the new market by listing a solar power generation fund, while Ichigo Group Holdings, which already manages a listed REIT, had said that it plans to offer a vehicle investing in photovoltaic generation facilities.

Private real estate investment trusts

Meanwhile parcel delivery firm Sagawa Express’ parent SG Holdings is reportedly preparing to launch a 100 billion yen private REIT to which it will sell assets in order to raise funds to expand its delivery networks.

Unlisted investment trusts have long been popular with pension funds and can be tailored to meet their individual needs. But it was not until November 2010 that Nomura Real Estate Asset Management kicked off the private REIT market which, according to a study by Sumitomo Mitsui Trust Research Institute, more than doubled in size last year to reach 865.4bn yen.

Thirty percent of that total was taken by local and shinkin banks – and once again the driver was the need to find returns superior to the 0.4% available on long-term Japan Government Bonds. The trusts offer around 4%.

According to a report in the Nikkei, Nittochi Asset management, a unit of Nippon-Tatemono group, ‘recently’ moved property assets into a trust and in January trading house Sumitomo launched a private REIT with property valued at worth 32.4bn yen, taking the total market to over 1tr yen. Managed by Sumitomo’s SC Realty Private Investment unit it owns four office and commercial buildings.

This was a simple shift of assets but Sumitomo Corp’s rival Mitsubishi Corp as long been pondering the possible connections between the type of products pension funds seek and the assets and expertise it has in house as part of its other businesses (see archive 2014-7-23 Mitsubishi Corp helps pension funds move into global infrastructure , 2011-11-19 Mitsubishi Corp to build infrastructure debt platform in US, 2011-1-17 Mitsubishi Corp confirms purpose of Torrey Cove deal and 2011-10-3 Mitsubishi gears up pension product power).

The new infrastructure market could offer a variety of productive way to put the two together.

Restrained in the past from entering into new types of investment by a disapproving regulator, corporate and government pension funds need have no fear this time around. The Pension Fund Association — effectively itself an arm of the Ministry of Health, Labour & Welfare — has already shown that this is a pukka way to go by putting part of the 12tr yen fund it administers into a Canadian-led infrastructure platform for which Mitsubishi Corp is the Japanese facilitator.

The infrastructure-trading corporate pension fund space continues to be well worth watching.

As in every lively market the action is two-way. In February Mitsubishi Corp  reportedly sold a parcel of logistics assets  managed by its Diamond Realty Management unit to Malaysia’s Employee Provident Fund, a state-run centralised scheme to which all workers belong.

Property specialist LaSalle Investment management also in on the action taking a small minority stake in a California State Teachers’ Retirement Scheme’s plan to invest US1.2bn in Asia-Pacific property targeting Tokyo, Yokohama, Osaka, Nagoya, Fukuoka and Kawasaki.

Update: On 3 March Mitsubishi Corp issued a statement noting that the company’s ‘core platform’ for its private equity business in Southeast Asia will henceforth be AIGF (ASEAN Industrial Growth Fund).

Headquartered in Singapore and launched the previous month, the Fund had just passed it first closing at US$130mn and was expecting to reach US$200mn in the next 12 months.

In addition to Mitsubishi Corp, the platform includes Shinsei Bank, and ‘prominent institutional investors including Hitachi Ltd, Yamato Kogo Co Ltd and the Toho Bank.’

It is not clear whether the Hitachi and Yamato Kogyo investments are being made by their pension funds — as the ‘institutional investor’ tag would suggest — or by the companies which sponsor them. Hitachi Ltd has Japan’s largest corporate pension fund with assets of over 800bn yen while Yamato Kogyo workers’ nest egg is much smaller.

A day earlier Australia’s AMP Capital issued a statement saying that it had been appointed to advise GII, ‘a Japanese company which invests in renewable energy assets across Japan’, on acquiring ‘high quality assets’ and to provide ongoing counsel.

The first acquisition will be a 2MW solar power generation facility  already in operation in Miyazaki Prefecture.

AMP  Capital is a well known infrastructure investor and part of AMP Group — Australia’s largest retail and corporate pension provider and its biggest life insurance concern.

On 9 March AMP announced that the AMP Capital Global Infrastructure Fund had reached it first close having attracted  US$540 million ‘from investors from countries such as Japan, Australia, the US, Canada, Ireland and Belgium’. Managing Partner Boe Pahari said ‘We are thrilled…’ etc.

For more on AMP Capital’s involvement with Japanese institutional investors see archive Infrastructure vehicles motoring along December 2011.

© 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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Returns well up at GPIF, transparency down (a bit)

The Government Pension Investment Fund ended the third quarter on 31 December 2014 with an asset allocation measurably different from that three months earlier.

A move out of government debt and into domestic and foreign stocks came just as equity prices were rising strongly (at home partly in expectation of the GPIF move), giving the Fund an overall time-weighted return of 5.30% for the quarter, up from 2.87% in the previous three months and making for a year-to-date 9.9%

GPIF’s holdings of government bonds, a segment that is largely managed inhouse and from which the cash to pay benefits is realized, fell from 49.61% of a portfolio of 130,884.6bn yen at 30 September 2014, to 43.13% of a portfolio of 137.035bn yen at the end of December, a drop of 11,332.9bn yen.

GPIF asset alloc at 30 Sept 2014GPIF Q3 2014 asset alloc

 

 

 

 

 

Also on the way down were holdings of short-term assets which fell from 4.30% at 30 September to just 2.62% at the close of the calendar year.

Domestic stocks benefitted from the reallocation rising from 18.23% to 19.8% of the portfolio but the biggest gainers were were international stocks, up from 17.41% to 19.64%  and international bonds up from 12.14% to 13.14%.

The value of foreign holdings will have been positively impacted by the fall in the yen which dropped from US$1=109.34  at the end September to US$1=119.87 at 31 December.

According to he Asian Wall Street Journal GPIF has said that 1.6tr yen of the 3.3tr yen rise in the value of domestic stock holdings was due to market appreciation.

Income for the October-December quarter was 6,623.3bn yen — well up on the 3,622.3bn yen of July-September — which helped total assets rise to a record 137,035.8bn. Generating rates of return that  are well ahead of future inflation is essential to the Fund which has more going out annually in benefits than it has coming in via contributions.

In a retrograde move the Fund did not publish the performance of each segment relative to its benchmarks — a table which used to be a regular feature of its quarterly reporting.

The results are here.

© 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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