Ban on Direct Stock Investment Upheld At World’s Largest Pension

Market conditions will soon force Japan’s Government Pension Investment Fund – the largest pension fund in the world – to draw down some of its bond investments and increase its allocation to equities, according to analysts.

But the GPIF will be investing in those stocks through external managers, after a board decided Tuesday to uphold the fund’s ban on direct investment.

From Japan News:

The ruling Liberal Democratic Party decided Tuesday not to remove a ban on direct stock investment by the manager of public pension funds amid concern over possible investment losses in the face of recent market volatility.

The decision was made at a meeting of the LDP’s project team on pension issues.

Direct stock investment by the Government Pension Investment Fund had been the focus of discussions on proposed structural reforms for the organization.

[…]

The Japan Business Federation and the Japanese Trade Union Confederation opposed lifting the ban, arguing that such a move could lead to direct control of private companies by the state-affiliated institution.

On the other hand, the GPIF and stock market participants called for the removal of the ban, citing advantages such as a reduction in the GPIF’s payment of commission fees for stock investment.

GPIF’s CIO last month said he was “sick of” outsourcing most of the fund’s investments, especially equity management.

GPIF oversees a portfolio of $1.2 trillion.

Photo by Ville Miettinen via FLickr CC License