Japan’s Government Pension Investment Fund (GPIF) will retain its existing portfolio composition, an equal split between domestic stocks and bonds, and foreign stocks and bonds in 2025 and beyond, it said on Monday.
Over the fund’s five year mid-term plan period to the end of the 2029 financial year, the GPIF has raised its investment return target to 1.9% from 1.7% above nominal wage growth. The 1.7% target had been in place since April 2015.
The return target could be more easily achieved by increasing the proportion of stocks in the portfolio but it would still be possible to hit the target with lower risk bonds, the fund said.
Since its inception in 2001 to the end of the 2023 financial year, the fund has made an average annual actual rate of return of 4.24%.
The announcement dispels speculation that it would increase its allocation to stocks that built up after the government last December proposed raising the investment return target to 1.9% from 1.7% above nominal wage growth.
The GPIF‘s movements are closely watched by markets as it is one of the world’s largest institutional investors with 258 trillion yen ($1.73 trillion) in total assets as of the end of December 2024.
The fund also maintained the 5% the upper limit of its total portfolio that can be made up of alternative assets, including infrastructure, private equity and real estate.
At its last review in 2020 the GPIF raised its allocation of foreign bonds to 25% from 15% and cut its allocation of domestic bonds to 25% from 35%.
Last week Japan’s health ministry said former MUFG Bank executive Kazuto Uchida will be the fund’s next head, replacing Masataka Miyazono, a former executive of Norinchukin Bank.
Reuters
