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Japan’s big public funds adopt GPIF’s equity-heavy asset allocation targets

Three large pension funds for public employees in Japan on Friday signed on to the equity-heavy asset allocation targets announced last October by the ¥137 trillion ($1.13 trillion) Government Pension Investment Fund, Tokyo.

In an announcement released Friday, the ¥18.9 trillion Pension Fund Association for Local Government Officials, the ¥7.6 trillion Federation of National Public Service Personnel Mutual Aid Associations and the ¥3.85 trillion Promotion and Mutual Aid Corporation for Private Schools of Japan adopted the GPIF's “model portfolio” weightings of 35% for Japanese bonds, 25% apiece for domestic and international equities, and 15% for foreign bonds.

Those moves were in line with a government push to equalize the pension burdens and benefits for private and public employees in Japan, with a target date set to unify the country's bifurcated system in October.

The move into higher risk, higher reward territory announced by the GPIF on Oct. 31 — against the backdrop of Prime Minister Shinzo Abe's push to wrench Japan's economy out of a prolonged deflationary spiral — marked a dramatic shift from the giant pension fund's prior targets of 60% Japanese bonds, 12% each domestic and international equities, 11% foreign bonds and 5% for cash.

Japan's three other big public pension funds, meanwhile, had previous targets for domestic bonds that ranged between 64% and 80% of their portfolios.

The biggest, the Pension Fund Association for Local Government Officials, previously targeted 64% Japanese bonds, 14% domestic stocks, 11% international stocks, 10% foreign bonds and 1% cash.

The pension fund's actual allocation as of the March 31, 2014, close of the prior fiscal year was 57.3% Japanese bonds, 16.1% domestic stocks, 13.7% international stocks, 11.1% foreign bonds and 1.8% cash.

A spokesman for the pension fund said more up-to-date asset allocation figures are not available.

The Federation of National Public Service Personnel Mutual Aid Associations' prior target asset allocation was 80% domestic bonds, 5% each domestic and international stocks, 4% cash, 4% deposits and 2% real estate.

As of the March 31, 2014, close of the latest fiscal year, the pension fund's actual allocation was 75.6% domestic bonds, 8.6% international stocks, 8% domestic stocks, 1.3% foreign bonds, 2.3% deposits and 2.1% each for real estate and cash.

The Promotion and Mutual Aid Corporation for Private Schools of Japan's previous target asset allocation was 65% domestic bonds, 10% each domestic stocks, foreign stocks and foreign bonds, and 5% for cash.

The pension fund's actual allocation as of March 31, 2014, was 56.4% domestic bonds, 11.9% foreign bonds, 11.1% foreign stocks, 10% domestic stocks and 10.6% cash.