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Biggest pension scheme selects managers for emerging markets

06 July 2012

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Japan's Government Pension Investment Fund (GPIF) announced it selected six asset managers to make its first investments in emerging markets in a bid to boost returns after rising payout obligations. The move is an important step towards diversifying the fund's portfolio.

The pension fund selected Invesco, Nomura Asset Management, Nomura Funds Research and Technologies, Mizuho Asset Management, Sumitomo Mitsui Asset Management and Lazard Asset Management. Although the tender, issued in 2010 asked for passive and active managers, no suitable managers for passive investments could be found.

These six managers were chosen from a shortlist of 11, which also included Chuo Mitsui Asset Management, Neuberger Berman, BNY Mellon, BNP Paribas Investment Partners and T&D Asset Management. 

Market analysts expect the investment in emerging market equities to start at around several hundred billion yen, which is too small to have a real impact on overall returns but a step towards diversifying GPIF's portfolio.

Lately the scheme, which according to the latest data held by Pension Funds Online holds assets worth JPY 116,3tn, has been struggling to deal with Japan's rapidly aging population. The scheme has been selling off some of its assets since March 2010 when it started to pay out more in benefits than it received in contributions. The struggle is set to continue as the first group of baby boomers in the country is will turn 65 early next year.

The pension fund makes allocations in line with its model portfolio, which is composed of 11% of domestic stocks, 67% of domestic bonds, 9% of foreign stocks, 8% of foreign bonds and 5% of short-term assets.

The latest investments in emerging market equities will be taken out of the foreign equities portfolio which according to the latest data equals just over 10% of the total portfolio.

First published 04.07.2012

azeevalkink@wilmington.co.uk