• Bloomberg


The world’s largest pension fund should aim for yearly returns of 1.7 percent plus the rate of wage growth, a government advisory panel reiterated.

The ¥128.6 trillion Government Pension Investment Fund should adopt that goal as it is suitable under all eight scenarios envisaged for the country’s economic outlook, according to a committee formed to help the health ministry decide on economic assumptions for investment targets. The group met Monday to finalize a draft report issued last week. The return figure may need to be increased if a health ministry review of pension finances finds that it’s not enough, panel member Kazuo Ueda said.

The panel’s final report implies a target of 4.2 percent annual returns for GPIF, which amounts to a 0.1 percentage point increase on its current goal. The rate would be the lowest among pension funds against which GPIF compares itself and comes as the Japanese manager faces pressure to take more risk to cover retirement payouts for the world’s oldest population.

The 10-member committee presented its final proposal, which oversees public pension funds, including GPIF, at its 17th meeting Monday. A separate 21-member advisory group will then use the recommendations to create a financial review of the funds and outline changes, according to a ministry document.

GPIF no longer needs to focus on domestic bonds, given quickening inflation, the panel reiterated Monday.

Japanese government bonds accounted for 55 percent of GPIF’s portfolio at the end of December, the smallest share since the fund was established in its current form in April 2006. GPIF held 17 percent of its assets in local shares last quarter, 15 percent in foreign equities and 11 percent in overseas bonds, according to a statement on its website.

California Public Employees’ Retirement System targets a 7.5 percent annualized nominal rate of return, or 4.75 percent in real terms, while the Canada Pension Plan Investment Board and Norway’s Government Pension Fund Global each require a 4 percent annualized real rate, according to data on the funds’ websites.

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