Government Pension Investment Fund, Tokyo, plans to invest in overseas infrastructure as it seeks to diversify its portfolio, according to two people with direct knowledge of the matter who asked not to be named because the discussions are private.
GPIF plans to make the investment in partnership with a foreign public pension fund, according to the people, who declined to disclose the nationality of the other party. Development Bank of Japan will provide the GPIF with expertise in infrastructure enterprises, they said.
The ¥124 trillion ($1.2 trillion) pension fund is under pressure to boost returns beyond what it earns on Japanese government bonds that yield less than the pace of inflation, and GPIF President Takahiro Mitani said in an interview last week that a move into alternative assets could begin in about a year. A move into foreign infrastructure by GPIF would follow similar steps taken by private Japanese pension funds, including the program run by cosmetics-maker Shiseido Co.
“It is positive for the public pension fund to invest in meaningful projects for the country and to excel in its investment management skills,” said Hidenori Suezawa, a financial market and fiscal analyst at SMBC Nikko Securities in Tokyo. “Having said that, it will take a while until you implement risk management and conditions to start making large investments, so it will probably not have a significant impact on the market for a while.”
GPIF spokesman Tomoyuki Hirao and DBJ spokesman Keisuke Kuma both declined to comment on the pension fund's plans. A government panel on Japan's financial and capital markets will provide details of the investment in a report to be published Friday, the people said.
Takatoshi Ito, head of a separate advisory panel to the GPIF, said in an interview last week that the pension fund needs to cut local debt holdings now. Mr. Ito said GPIF should pare domestic bonds immediately to 52% of assets, its lower limit.
Domestic bonds constituted 58% of its assets as of Sept. 30, according to its quarterly report. Japanese stocks accounted for 16%, followed by 13% in overseas equities, 10% in foreign bonds and the rest in short-term assets including cash.
The pension fund's website states its portfolio allocations are scheduled to remain unchanged until March 31, 2015.
