World’s Largest Pension Dives Into Junk, Emerging Bonds

Japan’s Government Pension Investment Fund on Thursday revealed a series of major changes to the foreign bond portion of its portfolio – including the hiring of more than two-dozen managers and a new focus on speculative-grade debt.

The GPIF has spent the last 12 months cutting back on domestic bonds and moving more money into domestic stocks – but, in its continued search for better returns, the fund is now also looking at high-yield bonds.

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Japan’s $1.2 trillion Government Pension Investment Fund, the world’s largest, unveiled sweeping changes to its foreign bond investments, hiring more than a dozen new asset managers and creating mandates for junk and emerging-market securities.

The fund picked managers for eight categories of active investments in overseas debt, it said Thursday. GPIF chose Nomura Asset Management Co. to oversee U.S high-yield bonds and UBS Global Asset Management (Japan) Ltd. for European speculative-grade debt. Janus Capital Management will handle part of the pension giant’s U.S. bond investments as a subcontractor for Diam Co., according to GPIF’s statement, which didn’t specify whether the money would go to Bill Gross’s fund. Ashmore Japan Co., a specialist in developing-country investment, won the only local-currency emerging-market contract.

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GPIF picked 27 managers, 21 for active and six for passive investments, according to its statement. All active managers will be compensated based on their performance, it said. Tokio Marine Asset Management Co. and Northern Trust Global Investments Japan KK were among companies that lost mandates in the reshuffle. The fund added BNP Paribas Investment Partners Japan Ltd. to oversee inflation-linked bonds.

GPIF expects yields of 5 percent or more from bonds rated BB or lower, the Nikkei newspaper reported. Japan’s 10-year sovereign bonds yield 0.345 percent. The yen weakened as much as 0.3 percent after the pension fund’s announcement Thursday.

The GPIF manages $1.2 trillion in assets.

Photo by Ville Miettinen via Flickr CC License