Japan Pension CIO: Portfolio Changes Created Confidence; But Will It Stay?

Over the last 12 months, Japan’s Government Pension Investment Fund (GPIF) has doubled its allocation to domestic stocks as part of a portfolio overhaul.

The fund’s CIO, Hiromichi Mizuno, this weekend said the infusion helped bring confidence and foreign investors to Japan’s stock market. But now that the pension fund is done leading the charge into domestic equities, Mizuno wonders: will foreign investors stay?

From the Nikkei Asian Review:

Prime Minister Shinzo Abe’s administration has done a good job attracting foreign investors with economic and financial stimulus, but it has to show investors how it will lift growth in Japan to ensure investor confidence, the chief investment officer of Japan’s $1.2 trillion public pension reserve fund said Sunday.

“They have to prove the third arrow is working,” said Hiromichi Mizuno, CIO of the Government Pension Investment Fund at a conference in Tokyo on Sunday, referring to the structural changes proposed by Prime Minister Shinzo Abe’s administration to put Japan on a long-term path to growth. “It’s a kind of moment of truth.”

[…]

Mr. Abe’s economic policies, including a dramatic overhaul of the GPIF’s portfolio into more equities, have drawn more foreign investors to Japan’s once-overlooked stock market. The GPIF announced in October that it would roughly double its allocation to Japanese stocks to 25%. At the end of June, domestic stocks were 23.39% of its total portfolio.

Mr. Mizuno said the GPIF’s portfolio changes had helped draw foreign investors because they knew that GPIF had increased its stock allocation, but said that the Japanese government needed to create an environment in which foreigners would be confident to invest “without the sense of security that the GPIF is going to buy into the equity market.”

Japan’s GPIF manages $1.2 trillion in assets and is the largest pension fund in the world.

Photo by Ville Miettinen via Flickr CC License