TOKYO Oct 28 The public fund for Japan's civil
servants is likely to put more of its $80 billion in domestic
stocks and less in Japanese government bonds as soon as
November, shifting from its ultra-conservative investment
allocation, people familiar with the matter said.
The move is part of Prime Minister Shinzo Abe's push to
increase the investment returns of the nation's $2 trillion in
public pension funds by trimming their massive weightings of
JGBs and seeking more opportunities in riskier assets.
The investment committee of the Federation of National
Public Service Personnel Mutual Aid Association, recommended in
mid-October that the fund lower the JGB weighting in its core
portfolio from the current 80 percent and raise the equity share
from 5 percent, the sources said.
The federation's 16-member governing council will meet in
November and is expected to adopt the change suggested by the
investment committee, they said. Reuters reported in August that
the federation was considering the change and could implement it
in the autumn.
The pension fund of the federation, known by its Japanese
initials KKR, covers 1.2 million active and retired public
The change would be in line with a shift towards more
aggressive investing by Japan's Government Pension Investment
Fund (GPIF), the world's biggest pension fund with $1.2 trillion
Japan decided last year to unify the portfolio allocations
of four public funds - KKR, GPIF, the Pension Fund Association
for Local Government Officials and the Promotion and Mutual Aid
Corporation for Private Schools of Japan - by October 2015.
The allocations of the 7.8 trillion yen ($80.13 billion) KKR
are furthest from the giant GPIF and so have to change the most
It is unclear the exact changes in weightings that KKR will
After making the biggest ever change to its model portfolio
in June, GPIF gives a weighting of 12 percent to domestic
stocks, 60 percent to domestic bonds, 12 percent to foreign
stocks, 11 percent to foreign bonds and 5 percent to short-term
The federation, which is supervised by the Ministry of
Finance's budget bureau, declined to comment on its strategy
review, an official at the fund said. He also declined to
comment whether a meeting by the governing council is scheduled
The investment committee has taken into account the surge in
Japanese stocks and fall in the yen since Abe came to office in
December with his aggressive reflationary fiscal and monetary
policies. Because of higher equity values, KKR is bumping up
against the limits of its existing allocations, which allow for
a certain tolerance either side of the core weightings, and
would otherwise have to sell domestic stocks.
As of March, the federation had invested 78.8 percent in
domestic bonds, 6.8 percent in domestic equities, 1.2 percent in
foreign bonds, 5.3 percent in foreign stocks, 2.7 percent in
short-term assets, 2.2 in real estate and 3.0 percent in loans.
The federation's current model portfolio gives a core
weighting of 80 percent to domestic bonds, 5 percent to domestic
stocks, 0 percent to foreign bonds, 5 percent to foreign stocks,
4 percent to short-term assets, 2 percent to real estate and 4
percent to loans.
The public fund last revised its core portfolio in April
2010. The federation will craft a new medium-term strategy,
expected to be hammered out in the fiscal year from April 2014
for implementation the following year.