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UPDATE 1-Japan to shake up world's top pension fund for bolder investment-sources
April 18, 2014 / 12:35 PM / in 4 years

UPDATE 1-Japan to shake up world's top pension fund for bolder investment-sources

(Adds details of members, background on allocations)

* At least 3 members of GPIF’s panel will depart

* PM Abe wants GPIF to rely less on JGB investment

* Fin Min Aso says GPIF will “make move” in June

By Chikafumi Hodo and Takaya Yamaguchi

TOKYO, April 18 (Reuters) - Japanese Prime Minister Shinzo Abe’s government plans to shake up the world’s biggest pension fund, replacing several key advisers in a sign that the premier wants public funds to invest more aggressively, sources with knowledge of the matter said.

The Government Pension Investment Fund’s portfolio of $1.26 trillion is larger than the economy of Mexico.

At least three of the 10 members of the GPIF’s Investment Committee, including two considered cautious about Abe’s call to shift from bonds to riskier investments like stocks, will soon leave the panel, the sources said.

Seki Obata, author of a book called, “Reflation is Dangerous”; Takeshige Komoda, who represents labour unions that want to protect their pensions; and long-serving member Masaharu Usuki will not have their terms on the committee renewed when they expire, the sources told Reuters.

Abe has been pressing the fund to put less money into low-yielding bonds and seek higher returns from riskier investments, in line with his policy of reviving the economy and breaking Japan’s risk-averse, deflationary mindset.

Government officials and committee members declined to comment on the record about the closely guarded GPIF personnel decisions. Chief Cabinet Secretary Yoshihide Suga said on Friday that the matter is up to Health Minister Norihisa Tamura, who appoints the committee members.

Tamura is expected to announce the reshuffle as soon as next week, the sources said.

Obata, a former Finance Ministry bureaucrat, is an associate professor at Keio University Business School and joined the committee four years ago.

Komoda, a former senior transport ministry bureaucrat who joined the committee two years ago, is the director general of JTUC Research Institute for Advancement of Living Standards, a think tank of Japan’s top labour federation.

Usuki, a former banker who joined the committee in 2008, is a professor at Nagoya City University’s Graduate School of Economics.

The investment committee oversees GPIF’s investment performance and fund management activities and advises the GPIF chairman.

GPIF has started reviewing its new investment strategy. Last month, it was set an investment target of 1.7 percent over the nominal wage increases by an advisory panel of the Health Ministry.

Founded in 2001, the public fund conducted the biggest shake-up of its investment strategy last June by revising its allocation targets to raise the core weighting for Japanese stocks while lowering that for domestic bonds.

GPIF currently targets a core weighting of 12 percent in Japanese stocks, 60 percent in domestic bonds, 11 percent in foreign bonds, 12 percent in foreign stocks and 5 percent in short-term assets.

Dealers believe reform of the public fund is one pillar of Abe’s growth strategy, which is expected to be unveiled in June.

Japanese Finance Minister Taro Aso told parliament earlier in the week that GPIF will “make a move” in the stock market from June.

On April 4, the fund named 14 new active managers to supervise its domestic equities investment and also added more benchmarks to its strategy. (Writing by William Mallard; Editing by Edmund Klamann and Hugh Lawson)

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