Global 2 major pension fund dinosaurs GPIF
“Alternative investment know-how”
Seeking diversification in the joint instability of stocks and bonds
Return rate in the first half of the year, 3 times ahead of the national pension
The Pension Reserve Management Management Independent Administrative Corporation (GPIF), which manages the Japanese public pension, recently asked the Korean National Pension Service for its know-how on alternative investments. GPIF, which has nearly 3,000 trillion won in operating assets, is a dinosaur that has a larger weight class than the national pension, but the operating return in the first half of this year is one-third of that of the national pension.
An official familiar with the National Pension Service said on the 17th, “The National Pension Service and the GPIF have never met in the past, but the GPIF recently asked us to share our know-how on alternative investment strategies.” The National Pension Service avoided immediate response to GPIF’s request, but plans to expand exchange channels in the future to strengthen global partnerships.
It’s 1.6 times bigger than the National Pension Service…The rate of return is one-third
GPIF is an ultra-large pension fund with operating assets of 317 trillion yen (about 3,000 trillion won based on the exchange rate at the end of June) as of the end of June. It is the second largest pension fund in the world after Norway’s pension fund (GPFG), and boasts 1.6 times the size of the national pension fund worth KRW 1,865 trillion at the same time. However, the recent operating rate of return is lower than that of the National Pension Service.
The GPIF did well last year, recording a 12% return, but the performance of the National Pension Service, which recorded an 18% return during the same period, was lower. This year, the gap widened further due to the strong Korean stock market. In the first half of this year, the National Pension Service recorded a 27% return, while the GPIF performed only around 8%.
Even considering that the national pension fund’s fall was large due to the increased volatility of the KOSPI in the second half of the year, it is a big gap to narrow it down. GPIF’s recent investment performance is largely dependent on the rise in the value of its overseas assets due to the weak yen.
Consideration of alternative assets on volatility in stocks and bonds
The reason why GPIF asked the National Pension Service for alternative investment know-how is analyzed to improve operating returns and secure portfolio stability. GPIF has been investing in alternative assets since 2013, but the investment is only around 5 trillion yen. Compared to the total assets, it is around 1.7%. This contrasts with the National Pension Service, which devotes 14% of the fund to alternative assets.
Due to the recent rise in global bond rates and the resulting increase in stock market volatility, global pension funds’ interest in alternative assets that show different correlations with stocks and bonds is increasing. However, GPIF does not manage alternative assets as a separate asset group.
At the request of the government…GPIF to Review Portfolio
GPIF will divide its portfolio into domestic stocks, domestic bonds, overseas stocks, and overseas bonds and manage them at a target ratio of 25% each. Alternative assets are considered one of these four asset groups depending on the nature of the investment.
This target portfolio was originally planned to be maintained during the fiscal year 2025-2029. However, at the request of the Takaichi administration due to the recent weak yen, the GPIF is reviewing its portfolio in the direction of increasing the proportion of domestic assets. In this process, it is estimated that measures to expand alternative investment are also discussed.
In July, GPIF invested 20 billion yen in its own private equity fund Advantage Partners, investing in its own private equity fund for the first time ever.