TOKYO, April 8 Japan's three public funds, which
collectively hold $296 billion in assets, are planning to invest
in inflation-linked Japanese government bonds and adopt a new
domestic stock index that focuses on return on equity aimed at
generating higher returns.
The move follows a recent series of changes in investment
strategies by the $1.26 trillion Government Pension Investment
Fund (GPIF) and pressure from Prime Minster Shinzo Abe's
government to diversify investments and rely less on
low-yielding domestic bonds.
The three public funds -- Pension Fund Association for Local
Government Officials, the Promotion and Mutual Aid Corporation
for Private Schools of Japan, and the Federation of National
Public Service Personnel Mutual Aid Association -- will be
required to manage their funds under the same asset allocation
weightings with GPIF from October 2015.
On Friday, GPIF said it had started allocating funds into
the JPX 400 index, which focuses on ROE and corporate
governance, but only in small amounts so far.
All three funds said they would begin investing in inflation
linked JGBs as GPIF had started investing in them last week.
The federation for civil servants, known as KKR and holds
assets of 7.8 trillion yen, and Pension Fund Association, which
holds 19.1 trillion yen, will adopt the JPX 400 index as a
benchmark in its passive domestic equity investments.
The public fund for private schools, which holds assets of
3.8 trillion yen, will use Russell Nomura Prime index as a
benchmark and consider using other indexes.
Japanese public funds are required to generate higher
returns to cope with pension payouts for the country's rapidly
GPIF made its biggest asset allocation shift since its birth
in 2001 in June and is reviewing its allocation strategy to
consider further increasing its target for stocks while lowering
the bond weighting.
The federation in December lowered allocations to Japanese
bonds and raised weightings to domestic equities.
The public fund for local governments slightly revised its
investment strategy in December by allowing the range of
allocation in domestic bonds to deviate by 10 percentage points
from the core weighting of 64 percent, wider than the previous 5
($1 = 103.1250 Japanese Yen)
(Reporting by Chikafumi Hodo; Editing by Jacqueline Wong)