Tag: stock investment

Japan Pension’s Portfolio Overhaul Pays Dividends With Record Quarter

Japan

A shift into riskier investments has paid off for Japan’s pension fund – at least in the fourth quarter of 2014.

In late 2014, Japan’s Government Pension Investment Fund (GPIF) began a portfolio overhaul that involved shifting a higher percentage of assets away from bonds and into stocks.

The well-publicized shift proved to be a boon for the Tokyo stock market, and the pension fund rode that wave as the fourth quarter of 2014 proved to be the second-best quarter in the fund’s history.

From the Wall Street Journal:

The GPIF on Friday reported a ¥6.6 trillion ($55 billion) investment profit in the December-ended quarter, a return of 5.2% compared with the previous quarter. The fund generated a return of 2.9% in the third quarter.

The value of the its assets under management reached ¥137 trillion, the highest since the fund was created in 2001.

GPIF officials don’t reveal the specifics of their investment activities, but figures released Friday showed the fund has likely sold about ¥6.5 trillion of Japanese government bonds during the quarter while buying roughly ¥2 trillion each of overseas and domestic equities, according to a Wall Street Journal analysis.

[…]

At the end of October, the GPIF announced major changes to its asset allocations, cutting its intended weighting to domestic bonds to 35% from 60%. It raised the allocation to foreign and domestic equities to 25% each, from 12% each, and to foreign bonds to 15% from 11%.

The fund is still only halfway toward achieving these targets.

The GPIF manages $1.1 trillion in pension assets and is the largest pension fund in the world.

 

Photo by Ville Miettinen via Flickr CC License

New Maryland Gov. Turns Focus to State Pensions

Maryland

Gov.-elect Larry Hogan is busy constructing a budget to give to state lawmakers this week. But next on Hogan’s to-do list is a thorough examination of the state’s underfunded pension system – and how it will affect the budget his team has just put together.

From the Baltimore Sun:

The Maryland State Retirement and Pension System had only about 69 percent of the assets needed to pay for future and current retirees’ pensions in the last fiscal year — well below the at least 80 percent target that many experts consider healthy.

Robert Neall, Hogan’s fiscal adviser, called the nearly $20 billion unfunded liability in the state retirement system “an area of concern.” Hogan’s team has been busy putting together a budget to present to the Maryland General Assembly on Jan. 23, but Neall said the administration will soon begin examining the health of the pension system.

“That’s going to require higher pension contributions [from the state] probably for two decades, that’s why it’s a concern,” Neall said. “They are just facts that we have to contend with as we put together a fiscal ’15 closure and a fiscal ’16 budget to present to the General Assembly.

[…]

Michael Golden, a spokesman for the state pension system, said reforms made to the pension system in 2011, including requiring most employees to contribute 7 percent of their salaries into the fund instead of 5 percent, put it “on the road to stability.”

“We feel like were on track to get to the 80 percent funded ratio by 2024; we think that’s a good track to be riding on,” Golden said. “We have no plans at this moment to do anything differently.”

Robert Burd, the retirement system’s acting chief investment officer, said the board chose to reduce the percentage of money invested in stocks — about 39 percent was invested in stocks in 2014, less than most other states — after the recession because of concern about risk. While Maryland has not enjoyed as much of a benefit from the rebound in the stock market, Burd said, the change leaves the fund less exposed to future downturns.

“That’s why we don’t look as good as some of our peers do when it comes to rankings,” Burd said.

Maryland’s pension system manages $45.4 billion in assets for 143,000 retirees and is 69 percent funded.