Japan GPIF’s Conservative Bond Rotation

japanJapan’s Government Pension Investment Fund (GPIF), the largest pension plan in the world, plans to increase investment in domestic equities and international assets. The GPIF has ¥111.9 trillion in assets. Cuts will be made in domestic bond allocations which could go down to 60% from 67%. Since the GPIF is a major holder of Japanese government bonds (JGB), it could stimulate market volatility in the Japanese debt market.

The allocation of domestic equities would increase from 11% to 12%. International equities will rise from 9% to 12%.

The financial conservatism of the GPIF is being challenged as Japan’s core demographic ages. In addition, other public pension systems from around the world like CalPERS and OMERS have taken a different approach to investing by allocating to alternatives. This yield approach strikes a stark difference versus liability-driven investing (LDI).

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