Business / Financial Markets

GPIF asset review may be delayed until December, adviser says

Bloomberg

Japan’s ¥127 trillion retirement fund may delay announcing its portfolio review until December, according to Takatoshi Ito, who was a top adviser to the government on overhauling public pensions.

A debate is underway on whether the Government Pension Investment Fund should buy and sell assets before publishing new allocation targets, Ito said Tuesday.

Should the GPIF decide to do so, a postponement until December would be necessary, he said.

Ito led a government-picked panel that last year urged the fund to reduce its reliance on domestic bonds.

Investors are waiting to see when and by how much the GPIF will increase its stock holdings as Prime Minister Shinzo Abe seeks better returns at the fund.

The GPIF should hold 35 to 40 percent of its assets in Japanese debt, and 20 to 25 percent each in local and foreign stocks, Ito said.

“The deliberation at the investment committee seems to be slower than expected,” Ito said by email from New York. “There is also a debate about whether adjustment of the portfolio comes before or after the announcement. If they move the portfolio before the announcement, a delay until December is necessary.”

The fund’s asset review will probably be completed this autumn, Yasuhiro Yonezawa, chairman of the GPIF’s investment committee, said in July.

Ito, whose advisory panel issued its final report last November, said a delay may be positive if it means the GPIF is buying before announcing new targets.

The fund is expected to increase its target for Japanese shares to 20 percent of holdings and reduce domestic bonds to 40 percent, an independent survey of fund managers and economists found in May. The goal for foreign bonds will be 14 percent while that for overseas shares will be 17 percent, according to the survey.

The GPIF held 53 percent of its assets in domestic bonds at the end of June, 17 percent in local stocks, 11 percent in foreign bonds and 16 percent in overseas stocks, according to its investment results.

The final report by Ito’s panel said the GPIF should diversify away from domestic bonds as the Japanese economy moves toward inflation, and the fund should become more independent of bureaucrats.

The fund should consider investing more in overseas assets, private equity, commodities, infrastructure and real estate investment trusts, according to the report.

As well as advising on public pensions, Ito headed a government panel on reviving Japan’s capital markets. He is currently a professor at the National Graduate Institute for Policy Studies in Tokyo and will take a role at Columbia University’s School of International and Public Affairs in January, the university said.

Coronavirus banner