One-quarter of Japanese defined benefit plans will be closed to new employees by 2008, predicts a new Greenwich Associates report. Twelve percent of defined benefit plans are already closed to new employees, up from 6% two years ago, and another 11% of plan sponsors will close their plans to new workers over the next two to three years, according to a survey conducted in April and May. The change is part of a wholesale shift in Japanese defined benefit plan provisions: in 2003, almost 100% of Japanese pension plans were in defined benefit structures, while that number dropped to 90% in 2004 and 72% this year. Japanese pension fund sponsors told Greenwich they expect only 50% of pension assets to remain in defined benefit plans by 2015.
Since most Japanese pension funds are underfunded, Greenwich researchers weren't surprised to find a strong appetite for alternative investments. Nearly 55% of Japanese institutional investors invest in hedge funds, and more than 15% plan to increase that investment in the next year, according to the survey. Most Japanese institutions also intend to increase their real estate and private equity investments.
