Japan Pensions Turn to Infrastructure, Hedge Funds for Stability: Survey

Japan’s pension funds are turning to alternatives like hedge funds in the wake of market volatility, according to a new JP Morgan survey.

(The survey was conducted months before the Brexit vote.)

One in four pensions funds said they’d increase their allocation to alternative assets to avoid market volatility, according to the survey.

More from Bloomberg:

Average allocations to alternative assets increased to a record 14 per cent in the 12 months ended March, from 13 per cent a year earlier, based on the responses from 127 domestic pension funds surveyed by the unit of JPMorgan Chase & Co. For pensions that have invested in alternatives, such assets are now their second-biggest allocation, accounting for 19 per cent of the total, following a 27 per cent holding in Japanese bonds, the survey showed.

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Now, with the UK’s decision to leave the European Union rattling markets, sending global equities lower and triggering large swings of major currencies, pensions’ appetite for alternative assets is likely to continue. About one in four pension funds surveyed said they will boost allocations to alternatives, while one in five said they will reduce allocations to Japanese equities amid a surge in volatility.

Within alternative assets, hedge funds accounted for 8.3 per cent, while real estate investment trusts and property each represented about 1 per cent to 2 per cent, according to the survey.

Investments in Japanese stocks and bonds have declined steadily in the past five years, with equities falling to 8.4 per cent from 14 per cent in 2012, and bond holdings declining to 30 per cent from 38 per cent in the period, the survey showed.