Japan’s Government Pension Investment Fund, Tokyo, will start investing in emerging markets equities as early as this quarter as it seeks to diversify assets and cover rising payouts.
The ¥108 trillion ($1.3 trillion) pension fund has decided on the managers who will handle the investments and is now in the process of setting up accounts in prospective markets, said Takahiro Mitani, president of the fund. He declined to disclose the size of the allocations or name the managers until investments are actually made.
“We expect to start investing in emerging market stocks by the end of this quarter or the beginning of the next quarter,” Mr. Mitani said in an interview in Tokyo Friday. “Because the markets are less liquid than the developed ones, we’ll likely begin with a small amount and then decide on whether to buy more depending on how it goes.”
The investments will be focused on markets included in the MSCI Emerging Markets index, which tracks 21 countries including Brazil, Russia, India, China, South Korea, Taiwan and South Africa, Mr. Mitani said. The index has gained 13% this year compared with an 8.6% increase in the MSCI World index of developed country stocks.
The GPIF doesn’t plan to begin investing in alternative assets such as hedge funds and real estate “any time soon,” Mr. Mitani said, citing the AIJ Investment Advisors incident where the Tokyo-based asset manager lost pension clients’ money.
As of Dec. 31, the government pension fund’s largest allocation — 67% — was to Japanese bonds, with 11% in Japanese stocks, 10% in overseas stocks and 8.4% in foreign bonds, according to the fund’s latest quarterly financial statement. The fund had a 0.58% return in the three months ended Dec. 31.