TOKYO: The head of Japan's Government Pension Investment Fund (GPIF), the world's biggest public pension fund, said it may venture into alternative assets, such as infrastructure and private equity funds, as an ageing population puts more stress on the pension system.
Looking around for new and better investment returns is vital for the fund as for the past three years it has been paying out more in benefits than it receives in contributions to the national pension system. GPIF Chairman Takahiro Mitani told Reuters in April that he was concerned that fewer people were paying into public pension plans at a time when more people were retiring from work.
Japan's population is expected to fall by 30 percent to below 90 million by 2060, when the proportion of those aged 65 or older will have almost doubled from 2010, a government agency survey showed in January. "We are considering expanding our investment targets to alternatives, which include infrastructure, real estate and private equity," Mitani said in an interview on Thursday. "The GPIF eventually will have to diversify its investment targets to alternative investments. I don't know if that's going to happen when I'm in this post but there's a question whether we should stick to these four asset classes forever," he said.
The fund, which has assets of 108.2 trillion yen ($1.38 trillion) - worth more than the Australian economy, the world's 13th largest - invests in four conventional asset classes, allocating funds in line with its model portfolio. This gives a weighting of 11 percent to Japanese stocks and 67 percent to domestic bonds, with 9 percent to foreign stocks and 8 percent to foreign bonds.
It also has 5 percent invested in short-term assets. Mitani said the GPIF, which began investing in emerging markets this year, was selecting advisers for its future alternative investment strategies aimed at diversifying and generating more returns for the long-term. Copyright Reuters, 2012
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