Japan Panel Undecided on In-House Investing for World’s Largest Pension Fund

A panel was split this week over whether to recommend that Japan’s Government Pension Investment Fund – the world’s largest pension fund – begin managing most of its equities in-house.

The CIO of GPIF said last month he was “sick of” outsourcing most of the fund’s investment management.

But the panel did propose the dismantling of rules prohibiting GPIF from investing in derivatives.

More from Bloomberg:

A panel advising on Japan’s Government Pension Investment Fund deferred a decision on whether to allow in-house investment on stocks.

Also, rules banning GPIF from investing in derivatives should be eased, the committee told reporters in Tokyo on Monday. The panel will present the two proposals to Health Minister Yasuhisa Shiozaki.

The health ministry advisory panel began debating in-house investments in earnest this year, the latest step in an unprecedented overhaul under Prime Minister Shinzo The 19-member group was divided over the proposal, with opponents saying that the fund will have too much influence over Japan Inc. if it directly owns voting rights.

Susumu Makihara, from Japan’s biggest business lobby Keidanren, said in previous panel meetings that GPIF will become a vehicle for the government to influence private company management. Proponents for change argue that GPIF would reduce the amount it spends on hiring external managers and be better-equipped to obtain real-time market information and investment knowledge.

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The law governing GPIF currently prohibits the fund from investing in stocks directly as well as trading in derivatives. The health ministry may use the panel’s recommendations to create a bill proposing any change in the current diet session. The bill will also include a plan to install a board of mostly independent directors to oversee its investments.

GPIF oversees a portfolio of $1.2 trillion.

Photo by Ville Miettinen via Flickr CC License