Government Pension Investment Fund, Tokyo, said it may become a net seller of bonds to cover payments in the world’s most rapidly aging society.
The fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. The sale may be less than that in the year starting April as bonds reach maturity, said Takahiro Mitani, fund president.
“We will likely be a net seller in the market,” Mr. Mitani said in an interview in Tokyo Thursday. “We certainly have to come up with an adequate amount” to pay pensions, he said, declining to elaborate on the amount.
Sales by the fund come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments. In the year ended March 2010, GPIF raised 720 billion yen in part through selling assets to fund the payouts.
The GPIF held 82.4 trillion yen in domestic bonds, or 70% of its assets, as of September, according to the fund’s latest quarterly financial statement. That compares with 12.6 trillion yen in Japanese stocks, or 10.7%; 9.6 trillion yen, or 8.2%, in foreign bonds; and 11.5 trillion yen, or 9.7%, in overseas stocks, the report shows.
The fund, which set out a five-year investment plan last March, said it will continue to allocate about two-thirds of its assets to domestic bonds, 11% to Japanese stocks, 8% to foreign bonds, 9% to overseas equities and 5% to short-term assets until March 2015.
GPIF doesn’t plan to start investing in so-called alternative assets such as commodities, real estate, infrastructure, private equity or hedge funds because the risks don’t suit its strategy, Mr. Mitani said.
After two years of losses following the onset of the global financial crisis, the fund returned to profit in the business year ended March 2010, as equity markets recovered globally, Mr. Mitani said in the fund’s latest annual report. The total return for the last fiscal year was 7.9%.