Survey: Japanese Pension Funds Eye Alt. Investments

Apr 28 2011 | 11:09am ET

Japanese pension funds are looking to increase their allocations to alternative assets while shedding domestic bonds and stocks, according to a recent survey by JPMorgan Chase & Co.

The firm’s Tokyo-based asset management unit polled 119 Japanese pension funds and found that 32% planned to increase their investments in alternative assets during the fiscal year ending March 2012. The funds will also continue investing in emerging market stocks and bonds, according to the study.

The findings represent a change in course for Japanese pension funds which have traditionally invested chiefly in bonds. With the 10-year Japanese government bond yield oscillating around 1.2% and the Nikkei 225 Stock Average down to about 25% of its 1989 peak, however, pension funds are seeking other sources of steady returns.

"We're expecting further diversification to continue going forward among pension funds' investment strategies," said Hidenori Suzuki, head of the strategic advisory group at JPMorgan Asset Management (Japan), during a Tokyo press conference this week to announce the survey's findings. "The trend to lower domestic bond holdings is rather new."

As reported by Bloomberg, the survey showed about 14% of respondents plan to reduce their investment in domestic bonds, while 21% expect to reduce allocations to local equities. Another 12% of the funds said they plan to increase allocations to emerging-market bonds and stocks.

Almost 89% of 79 respondents said Japan’s recent earthquake, tsunami and ensuing nuclear disaster will not have a “major” impact on their investment plans. That said, about 11% fear investments may not be carried out as planned.

JPMorgan surveyed 119 Japanese pension funds with combined assets of about 10 trillion yen ($122 billion) in this preliminary report. The full report is to be released in May.

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