Japan's pension fund behemoth to invest in infrastructure abroad
TOKYO -- Japan's Government Pension Investment Fund (GPIF) will diversify its portfolio beyond bonds and stocks for the first time, targeting high-return overseas infrastructure.
The public pension fund has some 120 trillion yen ($1.16 trillion) in assets under management. About 60% of that is in Japanese bonds, with the rest allotted to foreign bonds as well as domestic and international stocks.
Under a partnership with the Ontario Municipal Employees Retirement System, a Canadian pension fund, it now plans to invest in airports, railways, ports and power facilities in the U.S. and Europe.
Joint management will begin in 2014. Between tens of billions of yen and hundreds of billions of yen will likely be invested, although the exact amount has yet to be set.
Last month, a panel of experts recommended to the government that the GPIF step up stock investment and begin putting money into infrastructure and real estate as well, in view of how the nation is moving to overcome deflation.
Although infrastructure comes with the risk that the assets must be held for the long haul, it tends to offer higher returns than bonds and equities. Globally, pension funds are said to have far more than 20 trillion yen invested in infrastructure funds.
The GPIF is in talks with other foreign funds to form similar partnerships, suggesting that it may raise the cap on infrastructure investment in the future.
The fund has limited personnel that can handle new areas of investment, so the Ministry of Health, Labor and Welfare -- which oversees the GPIF -- decided Thursday to bump up the pay scale at the GPIF in an effort to bring aboard more investment experts.
The second paragraph from the bottom should better read (based on the original Japanese report)
The GPIF is in talks with other foreign PENSION funds to form similar partnerships, suggesting that it may raise the cap on infrastructure investment in the future.
The source of information for this Nikkei article was not disclosed.
Reuters and Bloomberg also reported that Development Bank of Japan is a part of the reported GPIF/OMERS co-investment scheme.
5:00pm EST TOKYO, Dec 12 (Reuters) - Japan's Government Pension Investment Fund, the world's largest public pension fund, will start buying inflation-linked government debt from April and will join Canada's OMERS in investing in infrastructure projects abroad, people familiar with the process said on Friday.
The $1.2 trillion fund will buy more than 400 billion yen in Japanese government bonds whose principal increases with rises in the nation's consumer prices, the sources told Reuters on condition of anonymity.
In tying up with OMERS, one of Canada's largest pension plans, GPIF joins a big investor with experience in infrastructure and will also be joined by the government-owned Development Bank of Japan, the sources said.
A spokeswoman for OMERS in Toronto was not immediately reachable for comment.
GPIF carries great weight in financial markets because of its enormous size and its role as a leader of other Japanese public funds, which have total assets of more than $2 trillion.
The fund is under pressure to overhaul its portfolio, which is heavily weighted towards very low-yielding straight JGBs, as part of Prime Minister Shinzo Abe's drive to boost returns to help support Japan's burgeoning elderly population. Abe also wants to channel the nation's vast pools of financial assets towards riskier investments and more productive uses.
Earlier this month, GPIF president Takahiro Mitani told Reuters he had a strong interest in buying inflation-linked JGBs as an inflation hedge for the fund's portfolio but noted that the current amount is very low. The government plans to double its issuance of inflation-linked JGBs to 1.2 trillion yen next fiscal year as Abe pushes to break Japan free from 15 years of deflation, government sources said at the time.
GPIF is also considering further investment in alternative assets, such as private equity, as recently recommended by a government panel, one source said on Friday.
A government advisory panel has been looking for ways to have GPIF help revitalise Japan's capital markets, finding more productive uses for the country's $15 trillion in household assets, which are largely locked in very low-yielding bank accounts and Japanese government bonds. (Reporting by Chikafumi Hodo and Takaya Yamaguchi; Additional reporting by Euan Rocha; Writing by William Mallard; Editing by Chizu Nomiyama)
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