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Asia Pacific Intelligence

$1.25 tln GPIF reports 10.23% return

Thursday, November 07, 2013

The annual report from the Government Pension Investment Fund, Japan – the world's largest pension fund - showed returns to March 31st 2013 for fiscal year 2012 were 10.23%. The Review of Operations opened with a message from the President, Takahiro Mitani, who commented on market conditions: "Over the course of fiscal year 2012, the performance was hit by the revived anxiety on European debt crisis, before buoyed by the appreciation of foreign currencies against Japanese yen and the rising equity prices home and abroad."

There has been criticism about the amount of debt the pension fund holds. Reporting in Bloomberg, Takatoshi Ito, dean of the University of Tokyo's graduate school of public policy, said: ""The majority of the panel thinks the GPIF is exposed to too much interest-rate risk", pointing specifically at the domestic bond portfolio. "If they're really aware of interest-rate risk, why are 60 percent of the assets in domestic bonds?" he asked.

Some members wanted the 121 tln yen ($1.25tln) GPIF to add new assets such as real-estate trusts, infrastructure and private-equity investments and commodities. The GPIF is hiring expert staff to diversify its asset base and adopt more sophisticated risk management measures.

The new wave of monetary stimulus in Japan, under the prime minister Shinzo Abe has put pressure on the GPIF's investment performance, which looks underwhelming in comparison. In the Bloomberg interview, Ito said: "The central bank's inflation goal "is plausible" and the government pension fund "should be using this as their main scenario. GPIF should be thinking of risk and returns on the basis of future economic forecasts."

This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
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