GPIF: may become net seller in 2009/10

By Chikafumi Hodo

TOKYO (Reuters) - Japan's public pension fund, the world's largest, said on Tuesday it could become a net seller in the markets from this financial year ending in March 2010, but the scale of it selling is likely to be modest.

The Government Pension Investment Fund, which manages about 117.6 trillion yen ($1.2 trillion) in Japanese bonds, foreign bonds, domestic equities and foreign equities, has been a net buyer up until last financial year.

"We may sell some amount, but the sales are not expected to be big as we can cover the shortfall from maturing bonds," GPIF President Takahiro Kawase told the Reuters Japan Investment Summit.

"I don't expect (GPIF selling) to have a major impact on the market," Kawase said.

The GPIF may need about 4-5 trillion yen of funds to supply the national treasury to help repay benefits to pension recipients for the current year, Kawase said.

But the public pension fund may not have to sell too much, as it can make up some of the shortfall with proceeds from maturing Japanese government bonds, which are also expected to total about 4-5 trillion yen, he said.

Kawase said the GPIF did not sell assets in the April-June quarter.

The GPIF could potentially sell assets where it has overweight holdings to raise cash for pension payouts if it can't cover the shortfall with the maturing bonds, Kawase said.

The GPIF is only overweight in domestic bonds in its portfolio, which has 74 percent of its money in Japanese bonds compared with 67 percent in its model portfolio.

Kawase added that the GPIF could remain a net seller in the markets for the next few years.

Last fiscal year, the fund had fresh inflows of investment money totaling about 11 trillion yen due to repayments of loans from semi-government entities and other public bodies and proceeds from "zaito" government-related agency bonds, but such inflows have now ended.

Regarding the introduction of a new model portfolio, the pension fund's allocation for bonds is expected to stay high, as it is in its current portfolio, Kawase said. But he added that he did not expect its target portfolio in equities to rise sharply.

"We have to invest in safe and efficient instruments under the law. We care about safety very much," Kawase said.

"We've been taking risks in line with the risks matching domestic bonds. So it's unlikely ... for example, that the weightings in stocks would rise to 40 percent from 20 percent," he said.

As of the end of March, the GPIF had 73.9 percent of its investments in domestic bonds including "zaito" government-related agency bonds, 9.7 percent in Japanese stocks, 7.7 percent in foreign stocks, 8.5 percent in foreign bonds and 0.1 percent in short term assets.