CIO of World’s Largest Pension: China is “Biggest Concern” in Portfolio

The CIO of Japan’s Government Pension Investment Fund (GPIF) said this week at a conference that China is the “biggest concern” in the fund’s portfolio – and that he originally intended to reduce exposure to China, but a portfolio overhaul altered that strategy.

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“It has been my biggest concern in our global portfolio,” Hiromichi Mizuno, chief investment officer for the Government Pension Investment Fund of Japan, which had around 137.48 trillion yen ($1.14 trillion) under management at the end of fiscal 2014. He’s particularly skeptical of China’s economic data.

“I started feeling like people just started trying to justify and kind of fooling ourselves saying ‘it should be ok,’ so just coast on the volatility,” he said at the Milken conference. He also expressed concerns over how China handled the recent market volatility.

“I was very disappointed because I used to believe in one thing, which is the people I see at the senior operational level [in China], they are all U.S.-educated or U.K.-educated,” Mizuno said. “I thought they knew how to handle a capital market, but the things we saw recently is not showing that…They are making a lot of decisions which are difficult to understand by outsiders.”

But he noted that his fund’s efforts to reduce emerging market exposure, particularly ahead of the expected interest rate hike by the Federal Reserve later this year, had been somewhat undermined by his active manager taking risks in the segment.

The GPIF manages $1.2 trillion in assets.

Photo by Ville Miettinen via FLickr CC License