Japan Pension Isn’t Hedging Against Stronger Yen; Investment Committee Member Calls Strategy “Unbelievable”


A member of the investment committee of the world’s largest pension fund expressed shock this week upon learning that the fund wasn’t hedging against a stronger yen.

Japan’s Government Pension Investment Fund (GPIF) overhauled its investment strategy in 2014, but hedging against the yen isn’t part of its plans.

From ai-cio.com:

Japan’s $1.1 trillion pension fund is refusing to hedge against a stronger yen despite the risks this poses to its growing pool of overseas assets.

The Government Pension Investment Fund (GPIF)—the world’s biggest pension fund—overhauled its strategy last year, buying into Prime Minister Shinzo Abe’s economic plan to boost inflation and weaken the yen. A weaker domestic currency would aid foreign holdings as well as some Japanese equities, asset classes to which the GPIF is increasing exposure.

However, Junko Shimizu, a professor at Gakushuin University and a member of the GPIF’s investment committee, told Bloomberg it was “unbelievable” that the pension had not moved to hedge the risk of the yen strengthening relative to other currencies. “My personal opinion is that they should look to hedge,” she added.

Shinichirou Mori, director of the planning department at the GPIF, said the pension did not make decisions “based on currency forecasts. We wouldn’t hedge based on a forecast.”

The GPIF manages $1.1 trillion in assets.


Photo by Ville Miettinen via FLickr CC License

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