(updated with correction)
Japanese corporate pension funds increased allocations to emerging markets equities and alternatives in fiscal year 2010, while reducing allocations to domestic equities and international bonds and domestic bonds, according to a J.P. Morgan Asset Management survey.
The survey shows that 54.6% are currently invested in emerging markets equity and 21% in emerging markets debt, while 79% are invested in absolute return. The survey results notes that more than 50% of respondents include emerging markets equities with foreign, or international, equities.
The average foreign equity allocation for the 12 months ended March 30 was 18.2%, up 1.4 percentage points; alternatives increased to 10.2%, up 0.9 percentage points; currency hedged foreign bonds were 3%, up 0.8 percentage points; and cash was 12%, up 1.6 percentage points.
Domestic bonds were 30.5%, down 1.8 percentage points; domestic equities dropped to 18%, down 2.2 percentage points; and foreign bonds were 8.1%, down 0.6 percentage points.
Japanese pension plan executives’ most important goal is to protect their plans from downside risk, Hidenori Suzuki, head of the strategic investment advisory group at J.P. Morgan Asset Management (Japan), said in a news release.
“To address this issue, they are increasing asset allocation to alternative assets, as well as introducing new types of investment strategies and a higher currency hedge ratio,” he said.
Mr. Suzuki said the recent earthquake in Japan “has not had a large influence on pension fund strategy so far; however, some pension funds are considering a change to their investment policies or a postponement of their scheduled portfolio changes.”
J.P. Morgan spokesman Darin Oduyoye could not immediately be reached for further comment.