Annual ranking shows extent of pension funds’ lacklustre year

Finance and pharmaceutical companies dominate the top 20 defined-benefit Japanese pension funds measured by assets, according to the latest annual ranking from Nenkin Joho using information provided in funds’ returned questionnairesnj-2016-dbs-ranking.

Based on 31 March 2016 numbers, the league table covers over 300 entities and the ‘returns’ column is characterized throughout by minus signs.

Nenkin Joho is the fortnightly newsletter from Rating & information, the actuarial consulting subsidary of the Nikkei group which includes the newspaper and indices of the same name.

As the group is self-selecting, and there are over 13,000 DB schemes, the lacklustre performance cannot be said to represent the entire sector — but that nonetheless seems likely.

This makes the 24.33% return enjoyed by Tokio Marine Nichido, part of Tokio Marine Holdings Japan’s largest non-mutual property/casualty insurer, stand out all the more.. The only other positive result in double figures is from 236th ranked Sekisui Plastics whose fund grew by 10.46% during the term to close with 4,215 million yen.

Last year Tokio Marine Nichido ranked ninth among the DBs with assets of 202,746mn yen. (For the top 20 at 31 March 2015 see under the ‘Rankings’ tab above.)

At about a quarter of the DBs with losses, the decline was under 1% and anything over 3% is relatively rare. Sakai Trading bucked the trend with the highest loss at a negative 8.96% but that follows the previous annual term’s positive 19.52%. nj-2016-epfs-ranking

In separate ranking of corporate retirement schemes of the ‘Employee Pension Fund’ type (which are also defined-benefit) the top slot was taken by Osaka Pharmaceutical, a multi-company arrangement covering firms in the sector, with assets of  326,269mn yen.

There were once over 2,000 EPFs but they are being phased out and only 333 remained at 31 March this year. Of those just 48 responded to Nenkin Joho’s questionnaire.

© 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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New study puts Japan’s pensions underfunding in perspective

Interesting new research from MSCI on Global Pension Underfunding Concerns shows Japan’s banks [column headed JP in the table below] to be the country’s worst-scoring sector on a measure which juxtaposes underfunded retirement-scheme liabilities with annual ‘revenues’.

The study would be even more interesting if it made plain whether the revenues concerned refers to the income of companies sponsoring the pension plans or contributions to the schemes themselves. And more interesting still if it set out how it arrived at the first part of the equation which measures ‘underfunding’.

msci-esg-pension-underfunding-by-sectorMost Japanese banking staff were at one time covered by a sector-wide Employee Pension Fund which, along with a  majority of others of this type, has now been dissolved and replaced by employers’ own arrangements that have only recently begun accumulating assets.

msci-most-underfunded-company-pensios-schemes-worldwide

US firms take four of the top five slots in MSCI’s ‘Companies with Highest Underfunding Ratio’ where they are joined by the UK’s BT Group. Japan’s Bank of Kyoto comes sixth.

The research covers the two most recent financial years and shows ‘the underfunded ratio to be worst in North America at 9.2%, followed by Europe at
4.7%, Japan at 3.7%, and Asia at only 1.8%.’

Emails to MSCI sent well before the Thanksgiving holiday asking for definitions of ‘income’ and ‘underfunding’ as used in the study received no reply.

© 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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Sokanji clients numbers dip a bit, sector leaders stay the same

The number of corporate pension funds with sokanji fell again in the year ended 31 March 2016 to reach 11,184, compared with 11,720 four years earlier, according to a recent report in Nenkin Joho, a fortnightly newsletter published by Rating & Investment Information (R&I) the actuarial consulting subsidiary of the Nikkei newspaper.

The drop has several causes including corporate restructurings which have seen the retirement schemes of subsidiaries subsumed by their parents but the biggest factor is that the only Employee Pension Funds (EPFs)  still winding their way towards closure are often those not sufficiently robust to be reborn in another form.

The toll for for the year 221 EPFs which were only partly compensated for by the 27 new defined-benefit type plans.

To understand the enormous importance of sokanji see Making the most of 11,000 captive clients. Sokanji 2012-2016

© 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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Post Bank: No stocks but huge amount in JGBs held to maturity

Holdings of Japanese central and local government debt at Japan Post Bank fell by 5% in the six months ending 31 September 2016 to reach 93,338.1 billion yen, accounting for 45.9% of the bank’s portfolio according to its just-released report.

The chief beneficiary was an increased allocation to foreign investment trusts which rose from 12.4% of investments to 13.9% valued at 28,409bn yen.

Domestic stocks do not feature at all.japan-post-bank-assets-at-2016-9-31

Only about a third of the Bank’s Japanese Government Bond holdings are shown in its report as ‘available-for-sale-securities’ [see lower table], implying that the other twojapan-post-bank-assets-for-sale2thirds are held to maturity.

Like its sister institution Japan Post Insurance [see posting above],  the Bank is no longer accumulating JBGs but buying other assets with the proceeds of those which mature.

© 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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Bonds held to maturity weigh on Post Insurance diversification

Japan Post Insurance’s domestic stock holdings stood at 5.2 billion yen at the end of the first half of the financial year on 31 September, substantially up from 0.9bn yen six months earlier. Yet the proportion of the portfolio for which they account was still below 0.1%.

The company’s just-published results show that its total assets fell during the term by 1.29% from a massive 81,543.6bn yen to a still-gigantic-in-any-context 80,492.2bn yen [see first table which is in billions of yen].

japan-post-insurance-general-account-asset-composition-2016-9-31Investments in corporate and government bonds dropped from 79% to 78% of the total hitting 58,238.2bn yen — or slightly more at fair value.

Much of the liquidity created by the fall in Japanese fixed-income investments was channeled into foreign bonds but foreign stocks appear to be still off the menu.

Both Japan Post Bank and Japan Post Insurance were once state agencies and so obliged to buy massive amounts of government debt in order fund the Fiscal Investment and Loan Program (FILP) and other official spending plans. They also agreed to hold the paper to maturity and have kept to that undertaking into their lives are corporate entities.

This creates a valuation problem and has led to a persistent misrepresentation of the pattern of Post Insurance’s investments and disinvestments.

The value of held-to-maturity bonds in the portfolio on a ‘fair’ basis is almost 19% greater than the 40,862.9bn yen at which it appears on the balance sheet [see second table – which is in millions of yen as is the third].                                             Text continues after tables

japan-po-insurance-2016-9-31-assets-at-blance-sheet-and-fair-value

Often said to be ‘shedding’ its government bond holdings Japan Insurance is in reality simply realising the value of those which mature and investing it elsewhere.

Tjapan-post-insurance-bonds-held-to-maturity-2016-9-31he new accounts show the very large size of the lump which remains to be run down but does not reveal the maturity of the paper and thus the timetable on which the flood of liquidity will be released.

© 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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AIG sells Fuji Life to Pacific Century’s FWD insurance arm

AIG has agreed to sell AIG Fuji Life, its Japanese life insurance arm, to FWD Group, a subsidiary of Pacific Century Group, for an undisclosed amount, according to a statement from the vendor.

This is the second time Pacific Century has acquired a business from AIG having bought what is now PineBridge Investments Japan Co Ltd from the US company in 2009.

AIG Fuji Life appears to have no third-party institutional assets under its stewardship while PineBridge seems to be de-emphasising institutional business in favour of retail.

At 31 March this year PineBridge was managing 86.4 billion yen under 28 pensions mandates awarded by Japanese companies, compared with 161.9 billion yen when it acquired the business. Conversely, mutual fund assets under management have risen from 294.2 billion yen to 430.1bn yen.

Pacific Century Group is headed by Richard Li Tzar Kai, the second son of Hong Kong magnate Li Ka Shing.

According to a story on Bloomberg quoting AIG Chief Executive Officer Peter Hancock, the two firms have been ‘‘in constant discussions on a range of potential opportunities since the PineBridge deal’.

The deal is the latest in what Bloomberg describes as ‘a wave of unprecedented deal making in the industry’ which has been underway for many years. (For details see Japan’s shrinking insurance sector under ‘Reference points’ at right.)

© 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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Japan to 2030 with/without structural reform – stark contrast

‘The Japanese economy remains at a standstill, with deteriorating external environments added after the negative growth due to the consumption tax hike in fiscal(FY) 2014. The major factor behind the poor growth is structural problems that have not yet been solved. As the falling population and stagnant investment efficiency and productivity are undermining Japan, the shadow of an economic collapse is creeping over Japanese society’.

So says the latest forecast from the Japan Center for Economic Research, entitled The Japanese Economy to Plunge to Zero Growth, which illustrates what the future will look like [below] both with and without structural reform.

The 5-page summary of the baseline scenario is here.

The report appeared on the same day that Bank of Japan Gov. Haruhiko Kuroda expressed confidence that his 2% inflation target will be achieved ‘around’ fiscal 2018.

jcer-outlook-for-2020s

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GPIF joins foreign groups seeking 30%-female company boards

The Government Pension Investment Fund announced on 11 November that it has joined the 30% Club in the UK and the Thirty Percent Coalition in the US. Both organisations want to see women directors account for 30% of public companies’ board members.

GPIF said in a statement that it believes the ‘integration of Environment, Social and Governance (ESG) factors into investment process mitigates investment risk. Gender diversity is regarded as one of major Social and Governance factors’.

The statement ends by noting that in ‘ joining these two [organisations], GPIF can expand the knowledge of ESG to fulfill fiduciary duty for our beneficiaries’.

This seems to mean that despite there being no entity in Japan with similar aims to those in the US and UK, the Fund can encourage the companies in which it invests to promote women to their boards, thereby delivering a better performance for the benefit of pensioners whose retirement savings GPIF invests.

This is a circuitous route and is taken up at some length in an interesting article in Citywire.  The MSCI study, Women on Boards, mentioned in this story, shows that in 2015 women held just 3.4% of Japan’s company directorships compared with 16.5% in North America and 21.5% in the UK.

The Citywire coverage does not speculate on when Japanese companies are likely to reach the 30% level — which will be difficult in an environment where the vast number of board members are senior employees.

Nor does it touch on the dire lack of the distaff side among GPIF’s senior ranks.

© 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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FSA plans closer look at funds via change in Stewardship Code

The Financial Services Agency plans to amend the its Stewardship code to include a provision that will, from next year, require institutional shareholders to reveal how they voted on proposals which investee companies put to them., according to the Nikkei.

The newspaper notes that “By essentially taking away institutional investors’ secret ballots, the agency hopes it can beef up its checks of how these big funds are managed.”

© 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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Sumitomo Mitsui Trust top Japanese firm in world ranking

Sumitomo Mitsui Trust Holdings is the highest ranked Japanese entity in the latest edition of Willis Towers Watson’s annual league table of the world’s largest asset management firms by amounts in their stewardship, coming in 23rd with willis-towers-watson-annual-ranking-of-worlds-largest-fm-jap-componentS$641,163 million at the end of 2015.

The study does not distinguish between third-party and inhouse assets and so is dominated by insurance companies which do both.

Sumitomo Mitsui Trust Holdings is shown to be the fourth fastest growing firm in the 2010-1015 period behind Aegon Group, New York Life Investments and Dimensional Fund Advisors but there is no note as to whether this is on a local currency or US dollar basis.

During the same time Willis Towers Watson gauges assets under management in Japan  to have grown 4% in yen terms but by -4% in the American unit.

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