June 3, 2014 / 1:05 AM / 5 years ago

UPDATE 1-Japan's GPIF could raise domestic stock allocation to 20 pct-Nikkei

(Adds comments on alternative asset investment)

* 20 pct in Japanese stocks wouldn’t be too high hurdle

* GPIF’s portfolio larger than Mexico’s economy

* GPIF may pour 1 trln yen in alternative assets

TOKYO, June 3 (Reuters) - Japan’s public pension fund, the world’s biggest, could raise its investment in domestic stocks to 20 percent of its portfolio from the current 12 percent, a top official with the fund was quoted as saying on Tuesday.

Yasuhiro Yonezawa, the recently appointed head of the investment committee of the $1.26 trillion Government Pension Investment Fund, said: “Twenty percent would not necessarily be too high a hurdle” for the GPIF’s weighting of Japanese stocks, the Nikkei financial daily reported.

Global financial markets are keenly watching the GPIF’s investment strategy as the fund, bigger than Mexico’s economy, is a huge investor and a bellwether for other Japanese institutional investors.

The government overhauled the GPIF’s structure in late April, appointing new committee members in a push towards Prime Minister Shinzo Abe’s goal of a more aggressive investment strategy.

GPIF now targets 12 percent of its investments 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.

GPIF could lower its weighting in Japanese government bonds and shift the proceeds into Japanese stocks, foreign bonds, U.S. and emerging markets equities, the Nikkei quoted Yonezawa as saying.

The public fund could expand its assets from the current conventional asset classes and pour into alternative assets, he said.

“We would like to set up a new asset class category which would invest in non-conventional assets such as real estate investment trusts (REITs) and infrastructure. We would want to invest about 1 trillion yen ($9.79 billion) in the category,” the daily quoted Yonezawa as saying.

In April, Tokihiko Shimizu, director-general of GPIF’s research department, said the establishment of the alternative asset category would be decided by the investment committee.

GPIF said in February it had reached an agreement with Canada’s Ontario Municipal Employees Retirement System and Development Bank of Japan to invest in infrastructure projects through an investment trust fund.

The Nikkei share average rose 0.9 percent in early trade. ($1 = 102.1750 Japanese Yen) (Reporting by Chikafumi Hodo; Writing by William Mallard; Editing by Chris Gallagher & Kim Coghill)

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