Japan's public pension fund, the world's largest scheme, will start investing in emerging market stocks by the end of the year, according to Bloomberg.

The Government Pension Investment Fund (GPIF), which manages more than 114trn Yen, wants to further diversify its portfolio in order to maintain stable returns.

It is understood that Takahiro Mitani, president of the fund, has confirmed that the fund is currently in the final stages of deciding which managers will handle the investments.

"The investments will be focused on markets included in the MSCI Emerging Markets Index", he told the financial newswire.

"It looks like a good time to start investing in emerging markets. Prospects for growth still remain strong for emerging markets relative to the developed countries, which means expected returns will be higher."

Currently, the fund's largest investment allocations are in domestic and international bonds according to data held by Pension Funds Online.

As of June 2011, GPIF has 11.26% of its assets invested in international equities and 11.55% in its domestic stock market.

Japan has been struggling for years with one of the fastest ageing populations in the world and due to recent events such as the tsunami, the earthquake and the volatile markets, schemes now need to diversify more to alleviate risk.

"Some say that other pension funds are investing in alternatives, but given the size of our fund, we have to be careful in making any decisions as the impact will be rather significant," Mitani told Bloomberg.

First published: 30.09.2011

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