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

Posted in Articles | Leave a comment

Japan Post Bank’s JGB holdings hit little over half its portfolio

Japan Post Bank’s holdings of Japan Government Bonds was down to just 51.86% of its 205.86 trillion yen portfolio at the close of the financial year on 31 March, the institution’s annual report shows; yet Japanese shares continued, at 935 million yen, to account for a proportion of holdings so small that it accounts for 0.0%. Most of the proceeds from JGBs outflow seems to have gone into interbank lending.

Japan Post Bank Portfolio 2014-2015The government- owned bank plans to list on the Tokyo Stock Exchange in September or October this year and investors may soon start to ask why it is not doing more to optimise earnings on its investments.

If the equities market comes off its current highs meanwhile, government would most probably welcome the redirection of chunk of Post Bank’s bond hoard into stocks in order to improve valuations generally and to get a better price for Post Bank, Post Insurance and Post Holdings which aim to list together.

As previously noted (see archive 2015-5-1 Post Bank clout can support Tokyo stocks for years to come) if the Bank were to devote the same proportion of its portfolio to domestic equities as other inititutions do it could prop up any government price targets for a very long time.

Late last month a Bloomberg commentary quoted Shuichi Ohsaki, a rates strategist at Bank of America Merrill Lynch , as estimating that Post Bank would offload about 10 trillion yen of JGBs in the financial year started on 1 April 2015, compared with double that in the previous annual term.

Similarly, Tomohisa Fujiki, head of interest-rate strategy for Japan at Paribas SA in Tokyo thought that “The pace of the bond reduction by Japan Post … won’t be as speedy from here.”

“Japan Post” includes both Japan Post Bank and Japan Post Insurance. The latter has yet to publish it annual report to 31 March 2015.

© 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

Posted in Articles | Leave a comment

95 trillion yen market yields up some of its secrets

A recent Pension Fund Association report on the activities of over 1,000 corporate retirement schemes has a wealth of information on trends in yields, asset allocation, management fees and the value and number of mandates in issue during the 17 years since asset managers were first allowed into the industry.

The data below are based on responses by PFA members to a questionnaire which it then analysed by type and size of fund.

Types of fund covered

In these tables an EPF [Employee Pension Fund] refers to an arrangement under which company schemes additionally assumed responsibility for collecting contributions to, and paying benefits from, a government scheme popularly known as the daiko. Since 2002 many of these have handed the task over to the Government Pension Investment Fund and thus become known as ‘DBs’ — though EPFs are themselves of the defined-benefit type. EPFs are now being phased out. Most of the 500 which remain are multi-company arrangements typically serving one industry in a single prefecture.

DB schemes (excluding EPFs) come in two types: fund and covenant. The difference is chiefly in governance with ‘fund’ plans run by teams of 2-3 (sometimes more) officers fulfilling roles with the same titles at each fund. These arrangements are mostly EPFs minus the daiko. Covenant schemes tend to be smaller, have a much greater tendency to pay lump sums and are often run by personnel or treasury departments, or by the company president’s office. They are mostly a reconstituted form of so-called ‘tax-qualified’ funds, the regulation of which was formerly with Ministry of Finance. DBs are today regulated by  the Ministry of Health, Labor & Welfare, as are EPFs.PFA members activities table 1

In the years before the pensions management market began to be deregulated in 1995, returns were a lot less than stellar might be supposed given that this was a boom time for the Tokyo Stock Market.PFA members activities table 2

In the year-ending 31 March 2014 EPFs did notably better than DBs – most probably because EPFs tend to be bigger. Unfortunately there is no breakdown of DBs by their type and size. If there were, and if the basis of the better performance is indeed size, then fund DBs may have done as well as EPFs.PFA members actisities table 5

People unfamiliar with Japan’s pension management market often claim that corporate pension funds have an asset allocation similar to the Government Pension Investment Fund. This not true. The bottom (blue) area below shows that in the year-ending 31 March 2014 domestic bonds made up just 27.9% of portfolios — about half the percentage for which they account at GPIF. The yellow area is domestic stocks while the green is foreign bonds. Shocking pink is foreign stocks, orange is ‘others’, which includes alternatives, and gray is ‘short-term’ holdings. The aquamarine area at the top is ‘other’ foreign stocks.PFA members activities table 7

At 85 trillion yen on 31 March 2014 the value of pension funds’ holdings had not quite returned to the pre-daiko-handover levels of 91tr yen eight years earlier. In US dollar terms the position is different since 91tr yen at US$1=117.263 yen amounts to less than 85tr yen at US$1=102.457 yen.  PFA Activities 4

The number of mandates in issue has also fallen both from its historical highs and compared with the early days of deregulation. PFA members activities table 8

Management fees seem to hsve stabilised around 0.30% PFA members activities tanbe 9

© 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

 

 

Posted in Articles | Leave a comment

Japanese pension funds’ US stocks allocation rises 6.1% in Q4

Assets in discretionary accounts at Japan’s fund managers rose 18.38% in the financial year ending 31 March 2015 when they reached a record 199,176.9 billion yen, up 5.29% on the close of the previous quarter on 31 December 2014.

By client type, accounts managed for overseas customers provided the greatest annual growth climbing 35.93% to 32,437.6bn yen– a quarter-on-quarter rise of 8.16% — and now account for 16.29% of total business compared with 14.18% a year ago.

The numbers come from the just-published quarterly report of the Japan Investment Advisors Association (JIAA) and are based on returns submitted by its members.

Investments managed for the giant Government Pension Investment Fund (GPIF) continue to dominate the business with 87,797.6bn yen (up 12% year-on-year, 7% quarter-on-quarter) in just 260 mandates. This compares with corporate pension clients’ 4,537 mandates worth 28,359.6bn yen at 31 March, a 7.33% y-on-y climb but a mere 0.17% q-on-q.

difficultThe same pattern can be seen in the way portfolios are allocated.

Those commentators who are generally baffled by Japan but dimly perceive in its institutional investors something they think they can recognise were busy just ahead of the numbers announcement predicting (in the case of the Financial Times twice in a week) that pensions funds would make a big shift out of Japanese bonds and into domestic and foreign stocks. No doubt they will see the outturn as confirming their predictions.

It doesn’t.

Total allocations to Japanese bonds fell by 16.53% y-on-y but that is very old news (see archive 23 March 2015 for coverage of third quarter JIAA numbers). Quarter-on-quarter the value of these holdings fell 0.51%.

Domestic stocks held rose by 40.73% y-on-y but in the final quarter the increase was 13.05%. About a third of this is probably accounted for by inflows of foreign funds and market values rose over the three months by 10% (using the Nikkei 225 index as a measure.

Meanwhile investments in US stocks rose 30.6% y-on-y (much of it the result of exchange rate shifts not of flows) but slowed to a still substantial 6.10% q-on-q while the market rose almost 1.5% in the same period.

Discerning trends in the JIAA numbers is also complicated by the omission of funds which investors manage inhouse and thus the exclusion of 26 trillion yen in passively managed domestic bonds which 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.

© 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

 

 

Posted in Articles | Leave a comment

Nomura looks set to rule mutual funds roost for years to come

Japan’s 20 fastest growing mutual fund firms saw their assets under management swell by an average of 80% in the year ending 31 March 2015. While that number includes some firms which entered the market only in the prior term, and were thus growing from a very low base, the average for the industry as a whole was still a respectable 21.1%. Mutual funds are called investment trusts in Japan.

Mutual fund firms by growth top 20 2015By total asset size Nomura Asset Management remains the market’s Very Big Beast expanding last year by 26.9% to 23,264.8 billion yen – over 8,900bn yen ahead of its nearest rival Daiwa Asset Management on 14,356.6bn yen.

The data come from an analysis of numbers submitted by the 70-odd asset managers in the business to their trade body, the Investment Trusts Association. The firms include in these returns only those funds which they offer directly to the market and so exclude any made available to other managers on a white-label basis. The numbers also exclude funds sold into the Japanese market directly from abroad.Mutal fund firms top 20 by AUM 2015

This year will see more competition for third place as currently fourth-ranked Mitsubishi Asset Management will take over fifth-placed Kokusai Asset Management in July and that should put the combined firm’s numbers very close to those of Nikko Asset Management,  the current number three on 10,364.1 yen.

The move is part of a final round of tidying up exercises left to be done after the repeated rounds of consolidation in the banking and insurance sectors in the 20 years from 1995 (see ‘Reference points’ in right-hand panel).

 

Five of the top 20 managers by size are foreign headquartered as are 12 of the next 20 including BlackRock Japan which grew by 38.3% to 382.5bn yen and so continued its steady climb from 34th three years ago to 27th. By contrast mutual fund assets at Schroder Investment Management grew by 11.8% but the firm slipped one place in the overall ranking from 39th to 40th – down from 37th in the year ending 31 March 2012.

Full versions of the ranking above will shortly appear under the ‘Rankings’ 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.

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

 

Posted in Articles | Leave a comment

New Tokyo Stock Exchange code asks companies to be nice

The Tokyo Stock Exchange has just published its Corporate Governance Code of which a provisional English translation is available here. The Code contains several sensible recommendations but not much by way of enforcement.

Posted in Articles | Leave a comment

Pension funds’ investment performance sustains 7-year upturn

The crisp account below of how a model Japanese pensions portfolio would have performed in the first quarter of the 2015 calendar year is taken from the just published latest edition of Towers Watson’s Global Pension Finance Watch.  The level reached on the actuarial consulting firm’s index is now the best it has been since September 2008.

Towers Watson 1Q 2015 global pesions finace

© 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

 

 

 

 

 

 

Posted in Articles | Leave a comment

Institutions missing the bus on direct property investment

KKR Hotel Tokyo

KKR Hotel Tokyo

Japan’s institutional investors look with some favour on both private and public real estate investment trusts but are still fighting shy of directly holding property — especially overseas where insurance companies’ memories of the missteps during the 1980s boom have yet to fade.

Small surprise then that the latest ranking of the world’s top 150 real estate investors by Investment & Pensions Europe magazine should include only two Tokyo-based entities: the Federation of National Public Service Personnel Mutual Aid Associations (known as KKR, the acronym of its name in Japanese) at 138th and the Bank of Japan at 150th.

What is a surprise is the lowly US$1.6 million that S&P Capital IQ, which calculated the numbers for ranking, puts on the value of KKR’s holdings. Either the pension fund has quietly sold the 10 hotels which bear its name in Tokyo, Osaka, Hiroshima, Sapporo and elsewhere or this is a mistake.

In recent years Japan has experienced a rush of funds into warehouse property but it was led not by locals. Rather in 2011 Singapore’s Global Logistic Properties set up a joint venture with the Canada Pension Plan Investment Board that now holds seven logistics parks in the country.

Two years later Australia’s IFM Investors, owned by 30 of the country’s pension funds, announced it was as opening an office in Tokyo. At 31 March this year IFM had total assets under management of $56 billion.

European retirement schemes are making their debut too with the Bayerische Versorgungkammer, which invests about 62 billion euros on behalf of twelve of Bavaria’s professional and municipal pension schemes, buying a 30,00 square foot commercial property in Osaka.

Meanwhile Reuters reports that the sale of Tokyo’s Simplex Investment Advisors, a property asset manager put on the block by US owners Aetos Capital Real Estate, is expected to fetch about 150 billion yen. Bidders are said to include Blackstone Group of the US, Hong Kong alternatives investment firm PAG and Japanese property firm Hulic Co.

1 Angel Lane

1 Angel Lane

And in the faraway  City of London Japanese securities behemoth Nomura has it European headquarters at 1 Angel Lane — where its landlord is a company 50% owned by Oxford Properties which is in turn owned by the Ontario Municipal Employees Retirement System.

On 13 May 2015 A$1=96.624 yen and Euro 1= 135.37 yen.

© 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

 

 

 

 

 

 

Posted in Articles | Leave a comment

Japanese mutual funds’ US$ equities holdings leap 42% in year

Jap Mutual funds top 20 foreign holdings by currencies Japanese mutual funds’ assets rose by 21% to 97,027.6 billion yen in the year ending 31 March 2015 when the proportion in foreign investments fell slightly from 33.6% to 31.8%, a number which masks some very big shifts within portfolios.

Of the 30,911bn yen in overseas instruments, equities accounted for 5,401.5bn yen, a rise of 26.5%, while bonds were up by just 3.7% but at 13,468.2bn yen are still by far the largest single asset class.

US dollar assets rose 31.5% to 17,250bn yen. Bonds accounted for 5,342.9bn yen of this, a rise of 16.1% on a year earlier — not much given the translation gains Jap Mutual funds top 20 foreign equities by currenciesavailable as the Japanese currency fell 13.5% against the American unit during the term.

Meanwhile US-dollar denominated equities saw a massive 42.9% leap to 2,809.8bn yen. This reflects the rise in he US stock market as well as currency translation gains  but it is not possible to discern what, if any, of the climb came from mutual funds putting more money abroad during the year

The data come from an analysis of the numbers  submitted by the 70-odd asset managers in the business to their trade body, the Investment Trusts Association. Their portfolios also include deposits and investment securities other than the stocks and bonds which are their mainstays.

Still in foreign equities, only those denominated in the top 20 currencies saw gains. The remaining 20+ fell with those of Poland dropping 14.4%, Thailand 20.9% and Malaysia 45.6%. Jap Mutual funds top 20 foreign bonds by currencies

The biggest gainer overall was India — up 120% to 394.0bn yen of which 86.7bn yen was in rupee-denominated equities (+86.7%) and 80.4bn yen (+666.6%) in bonds. At the other end of the scale was Nigeria which endured a 70% collapse to reach just 1.7bn yen.

© 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

 

 

 

 

Posted in Articles | Leave a comment

Life insurers reap huge boost to profits from asset management

T&D Holdings, owner of Taiyo Life, Daido Life and T&D Financial Life, is forecasting a rise in consolidated ordinary profits for the year ended 31 March 2015 of 26.8% to 189 billion yen thanks to an increase in gains on sales of securities, a company announcement said.

The firm has also upped the outlook for net income by 22.1% to 94bn yen due a climb in interest and dividends received, plus rising revenue from real estate for rent.

The news comes hard on the heels of a statement from Dai-ichi Life, Japan’s largest life co by premium income, that it expects net income for the year to have risen by a whopping 77.5%, to 142 billion yen, on an ordinary profits jump of 27.7% to 406bn yen.

There is no word as yet on whether the bulk of the gains arose from domestic or foreign investments and, if the latter, the degree to which the improvement is derived via translation gains from a fall in the value of the yen.

The  Nippon Life, currently the largest firm in the sector by assets under management, is a mutual which has no need to announce changes in earnings expectations. Meanwhile the three big insurance holdings companies, MS&AD, Sompo and Tokio Marine, have yet to make any statements. All are dwarfed by Japan Post Insurance which expects to go public in the second half of the current financial year.

News of much improved earnings from asset management appeared at the same time that the Japan Times reported  new government estimates showing that the number of children in Japan has fallen to a record low of 16.17 million, extending a 34-year decline.

The shrinking population has naturally meant shrinking business for life cos which have focussed expanding overseas and continue to do so even though the now weakening yen has made it more expensive.

© 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

Posted in Articles | Leave a comment