World’s Largest Pension Will Stand Pat on Asset Allocation

Japan’s Government Pension Investment Fund (GPIF) will not be altering its asset allocation in the near future, according to the fund’s new chief.

The pension fund is two years into implementing a major allocation shift that saw it dramatically increase its equity holdings.

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The country’s trillion-dollar public pension fund targets keeping 35 percent of its total assets in JGBs and 25 percent each in domestic and foreign stocks.

The GPIF needs to hedge against foreign currency moves to protect its assets from volatile market movements, Norihiro Takahashi told Reuters in an interview on Tuesday.

“The Bank of Japan introduced the negative interest rate policy in order to boost the economy and prices. Interest rates will rise if the policy works, which is why we do not see the need to change our basic asset allocation,” Takahashi said.

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GPIF, which is already prepared to hedge against the risk of fluctuations in the dollar and euro, plans to broaden its approach for hedging, Takahashi said.

It will hedge against drastic moves of not just dollar and euros but other currencies, he said, adding the fund will also hedge against both a strengthening and weakening yen.

“We need to show Japanese people that we take measures to minimize currency risks,” said Takahashi. “It is an ideal that we can hedge not only just the dollar and yen but currencies for the third countries against the risk of fluctuations”

GPIF oversees the management of a $1.1 trillion portfolio.