Japan’s Teachers’ Mutual Aid Co-operative Society, Tokyo, which manages $8.4 billion on behalf of its members, plans to start investing in Japanese real estate investment trusts and hedge funds for the first time to diversify risk.
The organization may allocate as much as 60 billion yen ($719 million) in J-REITs and hedge funds as early as September, said Toru Higuchi, a general manager of the organization’s asset management department. Teachers’ Mutual Aid will also invest in open-end real estate funds and stocks that provide stable dividends, such as utility companies, Mr. Higuchi said.
The organization voted last week for the adoption of a new investment strategy designed to counter a decline in value for both stocks and bonds, which have been its only investments.
“We have drastically changed our way of managing assets,” Mr. Higuchi said in an interview in Tokyo last week. “There is a limit to what stocks and bonds can do. We aim to expand our choice of investment to diversify risks.”
Japan’s pension funds have the world’s second-largest pool of assets after the U.S. with $3.47 trillion, according to Towers Watson. The pension assets had a compound annual growth rate of 0.2% over the past 10 years, Towers Watson said.
Japanese pension funds have a total of 37% investment in equity and 56% in bonds, with only 4% in alternative assets such as real estate, according to the report. That compares with 24% in such assets in the U.S. and 25% in Australia, it said.
In the year ended March 2011, 53% of Teachers’ Mutual’s assets were in government and corporate bonds. It had 6% in Japanese stocks, 5% in foreign bonds and 4% in overseas stocks. The rest was in cash and general account of life insurers, according to the fund.
Teachers’ Mutual will finalize its asset allocation target in June and select investment advisers to help with its investment in REITs, Mr. Higuchi said.