Japan Pension Funds

Japan Pension Funds

Japan Pension Funds Allocating More to Alternatives

Japanese pension funds are allocating more capital to alternative investments. The country's pension funds are cutting back on domestic bonds and stocks while boosting allocations to hedge funds and private equity.
Japanese pension funds plan to increase investments in alternative assets and pare their holdings of domestic bonds and stocks this fiscal year to diversify portfolios and bolster returns, a survey showed.

Thirty-two percent of 119 Japanese pension funds aim to increase investment in assets such as hedge funds in the year ending March 2012, according to a survey by JPMorgan Chase & Co.'s Tokyo-based asset management unit. They also plan to keep investing in emerging-market stocks and bonds, it showed.

Japanese pensions, which have traditionally invested mainly in bonds, are seeking other assets to maintain steady returns and fund retiree benefits in a country where more than one in five people are over 65. The 10-year Japanese government bond yield is hovering around 1.2%, while the Nikkei 225 Stock Average is about a quarter of its 1989 peak.

"We're expecting further diversification to continue going forward among pension funds' investment strategies," Hidenori Suzuki, head of the strategic advisory group at JPMorgan Asset Management (Japan), said at a briefing in Tokyo today to announce the survey's findings. "The trend to lower domestic bond holdings is rather new."  Source

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