World's Biggest Pension to Start Emerging Stocks Investment# Stock
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http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/30/blo
(Updates with latest market moves in sixth paragraph.)
World's Biggest Pension to Start Emerging Stocks Investment
Sept. 30 (Bloomberg) -- Japan's public pension fund, the world's largest,
will start investing in emerging market stocks by the end of the year as it
diversifies assets to maintain stable returns.
The Government Pension Investment Fund, which oversees 114 trillion yen ($1.
5 trillion), is in the final stage of deciding the managers who will handle
the investments, said Takahiro Mitani, president of the fund, known as GPIF.
The investments will be focused on markets included in the MSCI Emerging
Markets Index, he said.
"It looks like a good time to start investing in emerging markets," said
Mitani in an interview in Tokyo on Sept. 27. "Prospects for growth still
remain strong for emerging markets relative to the developed countries,
which means expected returns will be higher."
The fund, whose majority of investments is in domestic bonds, is seeking
better returns to cover payments in the world's most rapidly aging society.
The MSCI Emerging Markets Index has dropped 21 percent this year, more than
the 12 percent decline by the MSCI World Index of developed stocks, amid
inflationary concerns and as the European sovereign debt crisis prompted
investors to sell assets deemed risky.
The shares of companies included in the emerging-market gauge, are trading
at 9.9 times estimated 12-month earnings, compared with 12.2 times for
stocks in advanced economies. Developing nations made up eight of the 10
best performers this year among 93 global benchmark stock gauges tracked by
Bloomberg.
Emerging Economies
MSCI Emerging Markets Index, which tracks 21 countries including Brazil,
China, India, Russia and Turkey, fell 1.2 percent as of 4:48 p.m. in Tokyo
today, while the MSCI World Index lost 0.6 percent.
The International Monetary Fund forecast the world economy will expand 4
percent this year and next on Sept. 20, compared with June forecasts of 4.3
percent in 2011 and of 4.5 percent in 2012. IMF said it based its forecast
of a "modest pickup of activity" in advanced economies and of "robust growth
" in emerging counterparts on the premise that European policy makers
implement the measures to reinforce their bailout mechanism agreed on in
July.
GPIF will probably remain a net seller in the fiscal year starting April
2012 to cover pension payments, Mitani said. The fund will sell fewer
Japanese bonds this fiscal year from its portfolio than it sold last year as
bonds reach maturity, he said. It sold 4.7 trillion yen worth of bonds in
the fiscal year ended March 31, according to GPIF.
Investment Plan
Under a five-year investment plan set up in March 2010, GPIF will allocate
about two-thirds of its assets to domestic bonds, 11 percent to Japanese
stocks, 8 percent to foreign bonds, 9 percent to overseas equities and 5
percent to short-term assets.
The March 11 earthquake and ensuing tsunami that led to a nuclear crisis in
Japan hasn't affected its allocations, Mitani said.
"There is no doubt that the disaster affected Japan's economy," said Mitani.
"But from a long-term investment plan perspective, it didn't have any
significant impact for us."
GPIF lost 0.25 percent, or 299 billion yen, in the year ended March 31, as
investments in Japanese equities and foreign bonds fell in value, the fund
said in July. For the three months ended June 30, the fund returned 0.2
percent, or 240 billion yen, as investments in bonds helped offset losses in
equities, the fund said in August.
Alternative Assets
The pension is the biggest in the world by assets under management,
according to the Towers Watson Global 300 survey published in September,
followed by Norway's government pension.
GPIF has commissioned a study on alternative assets, such as hedge funds,
real estate and private equity, as it seeks investments that will not be
correlated to the fund's traditional holdings of bonds and equities, Mitani
said.
"Some say that other pension funds are investing in alternatives, but given
the size of our fund, we have to be careful in making any decisions as the
impact will be rather significant," Mitani said.
The likelihood of European economies collapsing because of Greece's
sovereign debt problems is unlikely, given Germany's economic stability,
Mitani said. In the U.S., the key will be whether President Barack Obama's
proposals to spark the economy and trim the nation's long-term deficit will
be effectively implemented, he said.
"A fund like us cannot get too emotional over economic conditions and change
allocations accordingly on a short-term basis," Mitani said.
--Editors: Andreea Papuc, Linus Chua
(Updates with latest market moves in sixth paragraph.)
World's Biggest Pension to Start Emerging Stocks Investment
Sept. 30 (Bloomberg) -- Japan's public pension fund, the world's largest,
will start investing in emerging market stocks by the end of the year as it
diversifies assets to maintain stable returns.
The Government Pension Investment Fund, which oversees 114 trillion yen ($1.
5 trillion), is in the final stage of deciding the managers who will handle
the investments, said Takahiro Mitani, president of the fund, known as GPIF.
The investments will be focused on markets included in the MSCI Emerging
Markets Index, he said.
"It looks like a good time to start investing in emerging markets," said
Mitani in an interview in Tokyo on Sept. 27. "Prospects for growth still
remain strong for emerging markets relative to the developed countries,
which means expected returns will be higher."
The fund, whose majority of investments is in domestic bonds, is seeking
better returns to cover payments in the world's most rapidly aging society.
The MSCI Emerging Markets Index has dropped 21 percent this year, more than
the 12 percent decline by the MSCI World Index of developed stocks, amid
inflationary concerns and as the European sovereign debt crisis prompted
investors to sell assets deemed risky.
The shares of companies included in the emerging-market gauge, are trading
at 9.9 times estimated 12-month earnings, compared with 12.2 times for
stocks in advanced economies. Developing nations made up eight of the 10
best performers this year among 93 global benchmark stock gauges tracked by
Bloomberg.
Emerging Economies
MSCI Emerging Markets Index, which tracks 21 countries including Brazil,
China, India, Russia and Turkey, fell 1.2 percent as of 4:48 p.m. in Tokyo
today, while the MSCI World Index lost 0.6 percent.
The International Monetary Fund forecast the world economy will expand 4
percent this year and next on Sept. 20, compared with June forecasts of 4.3
percent in 2011 and of 4.5 percent in 2012. IMF said it based its forecast
of a "modest pickup of activity" in advanced economies and of "robust growth
" in emerging counterparts on the premise that European policy makers
implement the measures to reinforce their bailout mechanism agreed on in
July.
GPIF will probably remain a net seller in the fiscal year starting April
2012 to cover pension payments, Mitani said. The fund will sell fewer
Japanese bonds this fiscal year from its portfolio than it sold last year as
bonds reach maturity, he said. It sold 4.7 trillion yen worth of bonds in
the fiscal year ended March 31, according to GPIF.
Investment Plan
Under a five-year investment plan set up in March 2010, GPIF will allocate
about two-thirds of its assets to domestic bonds, 11 percent to Japanese
stocks, 8 percent to foreign bonds, 9 percent to overseas equities and 5
percent to short-term assets.
The March 11 earthquake and ensuing tsunami that led to a nuclear crisis in
Japan hasn't affected its allocations, Mitani said.
"There is no doubt that the disaster affected Japan's economy," said Mitani.
"But from a long-term investment plan perspective, it didn't have any
significant impact for us."
GPIF lost 0.25 percent, or 299 billion yen, in the year ended March 31, as
investments in Japanese equities and foreign bonds fell in value, the fund
said in July. For the three months ended June 30, the fund returned 0.2
percent, or 240 billion yen, as investments in bonds helped offset losses in
equities, the fund said in August.
Alternative Assets
The pension is the biggest in the world by assets under management,
according to the Towers Watson Global 300 survey published in September,
followed by Norway's government pension.
GPIF has commissioned a study on alternative assets, such as hedge funds,
real estate and private equity, as it seeks investments that will not be
correlated to the fund's traditional holdings of bonds and equities, Mitani
said.
"Some say that other pension funds are investing in alternatives, but given
the size of our fund, we have to be careful in making any decisions as the
impact will be rather significant," Mitani said.
The likelihood of European economies collapsing because of Greece's
sovereign debt problems is unlikely, given Germany's economic stability,
Mitani said. In the U.S., the key will be whether President Barack Obama's
proposals to spark the economy and trim the nation's long-term deficit will
be effectively implemented, he said.
"A fund like us cannot get too emotional over economic conditions and change
allocations accordingly on a short-term basis," Mitani said.
--Editors: Andreea Papuc, Linus Chua
