| LONDON, June 24
LONDON, June 24 Japan's public pension fund, the
world's largest with a pool of $1.1 trillion, may start buying
real estate to boost returns in a move that could involve tens
of billions pouring into cities such as London and Paris,
property consultant CBRE said.
Any such plan by Japan's Government Pension Investment Fund
(GPIF) would come as the country's government urges public funds
to increase returns to help revive the economy, part of the
game-changing economic policies of Prime Minister Shinzo Abe.
Earlier this month, the GPIF said it would shift away from
bonds and into stocks to take on greater risk in the most
significant shift in its asset allocation since 2006.
Property typically offers a higher yield, or rental income
as a percentage of a property's value, than government bonds
because it is seen as a riskier investment that takes longer to
buy or sell and faces the risk of becoming empty.
As central banks keep interest rates historically low, many
government bond yields offer little or no return, prompting some
investors to shift into real estate.
"It is striking just how much larger GPIF is than any of the
word's other pension funds ... Therefore, if it ultimately
expands its remit to include international real estate, it could
become a very significant player," CBRE said.
No-one at the GPIF could immediately be reached for comment
outside regular Japanese business hours.
A typical real estate allocation for a fund entering the
market would be 5 percent, growing to 10 percent, said Simon
Barrowcliff at CBRE. That could mean up to $100 billion of deals
in major global cities like London, Paris or New York.
Overseas buyers from as far afield as Brazil and Azerbaijan
spent 10.5 billion pounds ($16 billion) in the British capital
last year, a 42 percent increase on 2011 that accounted for
about a fifth of all commercial property deals by value in
Asian investors have parked billions of dollars in the
relative safety of commercial property in major world cities
since the financial crash, often unable to spend such large sums
in their smaller home markets.
Rule changes in countries like Taiwan, China and Australia
that free up investors to spend more on property means the flood
of cash will increase, CBRE said.