ATLANTA (HedgeCo.Net)- The Government Pension Investment Fund of Japan may soon begin to implement hedge fund investment strategies; such news comes as a surprise to members of the hedge fundinvestment community. Traditionally, Japanese Pension funds have always adopted a conservative investment philosophy until now. This news was announced by Mr. Noboru Terada, the Chief InvestmentOfficer of the Government Pension Fund.
Noboru however hinted that any hedge fund investment must be approved by a government committee before any disbursement of funds. The Government pension fund has about 50% of its assets currently invested in Japanese bonds, and another 25% is invested in Japanese equities according to the report. A small portfolio is also held in unspecified short term assets. The Japanese Government Pension fund is worth about 31.599 trillion yen or US$294 billion.
The pension fund is expected to invest assets in index fund vehicles, as well as selected long or short bias portfolios. There is increasing interest by Pension fund and Endowment managers in utilizing hedge fund strategies as the global equity markets stabilize. Many pension funds have made investments in hedge fund portfolios. Several large North American Pension schemes such as California Public Employees Retirement System [CalPERS] as well as the Ontario Municipal Employees Retirement System [OMERS] have adopted hedge fund strategies, as part of their investment philosophy. The average U.S. Pension plan has about 7% of their total assets invested in hedge funds. European Pension plans have been reluctant to invest in hedge funds.
Recently, the $4 billion Philadelphia Public Employees’ Retirement System selected Albourne Partners, Wilshire Associates and CRA Rogers Casey as the three finalists to help their fund implement its hedge fund strategy. The retirement system would eventually invest 5% of its assts to hedge fund managers.
A recent study by Goldman Sachs and consultants Russell Investment showed that Endowments are more aggressive than Pension funds in implementing hedge fund strategies with about 10% of their assets invested in hedge fund portfolios compared to about 7% for Pension plans. Pension funds hedge fund portfolio undoubtedly would increase in future in light of efforts being made by hedge fund managers and administrators to increase hedge fund transparency which has always been an area of concern for Pension funds.
Source: Paul Oranika
Editor in Chief, Hedgeco.net
