World’s Largest Pension May Continue Adding Billions in Domestic Stocks

Last month, Bloomberg reported that Japan’s Government Pension Investment Fund (GPIF) would have to buy $54 billion worth of stocks to meet its allocation target of 25 percent.

Now, a report from a brokerage firm suggests the pension fund has room to add billions worth of local stocks to its portfolio in the near future.

From Bloomberg:

The world’s biggest retirement fund has scope to buy $47 billion in Japanese shares after they tumbled this year, according to Daiwa Securities Group Inc.

The 139.8 trillion yen ($1.2 trillion) Government Pension Investment Fund’s domestic equities probably fell to about 21 percent of assets at the end of February, short of the 25 percent goal for such investments, the brokerage wrote in a report published Tuesday. That means the Japanese fund could purchase as much as 5.3 trillion yen in shares, it said. GPIF may cut domestic bonds by 11.2 billion yen as holdings probably exceed their target, according to Bank of America Corp.’s Merrill Lynch unit.

[…]

“GPIF investment in Japanese stocks might well underpin prices even as stocks feel downward pressure due to concern about the global economy,” Merrill Lynch strategists led by Shuichi Ohsaki wrote in a report Tuesday. If equities continue to weaken, GPIF “will probably have to further rebalance its portfolio.”

There are signs Japan’s public retirement managers have already been adding to holdings. Trust banks, whose clients include pension funds, purchased a record 500 billion yen in local stocks in the week ended Feb. 19, a 13th straight week of net buying.

GPIF manages $1.3 trillion in assets.

Photo by Ville Miettinen via Flickr CC License