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Alternative Market Briefing

Japanese pensions double their investment in hedge funds

Wednesday, September 26, 2012

Beverly Chandler, Opalesque London: A new report from Cerulli Associates finds that over the last five years, Japanese institutional investors have acquired new risk appetites while maintaining their core conservative approach. The Pension Fund Association estimates that Japanese pensions allocate an average 4.9% of assets to hedge funds as of March 2011, an increase from 2% in the 2007-2011 period. The report says: "This development is creating a more nuanced marketplace and is opening opportunities for a larger variety of asset managers".

With assets totalling US$13.2 trillion as of March 2012, Japanese institutions have Asia's largest pool of institutional money but have offered little outsourcing opportunities to global asset managers because they tend to prefer fixed income and domestic assets. However, in a picture that is familiar throughout the world, things are beginning to change as pensions, faced with increased pension benefit payments in an ageing population, have begun portfolio diversification in hopes of getting higher returns, while controlling risks.

The report finds that corporate pensions have been fastest at evolving their investment approach. "In March 2011, Japanese equities allocation fell below 20% of total corporate pension assets for the first time. In 1999, this asset class was on average 36.5% of the total, but has slid to 18.9% in 2011. The fall wa......................

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