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World's Biggest Pension Fund Hires Asset Managers for Junk Bonds

World's Biggest Pension Fund Hires Asset Managers for Junk Bonds

Thursday, 01 October 2015 07:45 AM

Japan’s $1.2 trillion Government Pension Investment Fund unveiled sweeping changes to its foreign bond investments, hiring more than a dozen new asset managers and creating mandates for junk debt and emerging-market securities.

The fund selected external managers for eight categories of active investments, including U.S. and European high-yield, emerging-market and inflation-linked debt, it said today. GPIF chose Nomura Asset Management Co. to oversee U.S high-yield bonds and UBS Global Asset Management (Japan) Ltd. for European speculative-grade debt, it said. GPIF expects yields of 5 percent or more from bonds rated BB or lower, the Nikkei newspaper reported Thursday. Japan’s 10-year sovereign bonds yield 0.345 percent.

GPIF faces mounting pressure to boost returns and diversify assets as pension payouts for the world’s oldest population swell. The fund has pared domestic bonds in the past year in favor of equities, inflation-linked debt and alternative assets. Its foray into high-yield bonds comes as the securities hand investors the biggest losses in four years.

A gauge of global speculative-grade debt compiled by Bank of America Merrill Lynch dropped for a fourth month in September, the longest stretch since the data began in 1998. This year is shaping up as one to forget for investors in risky assets, with stocks, commodities and currency funds all in the red amid concern about the outlook for the global economy and as the Federal Reserve prepares to raise interest rates.

Investors in junk debt lost 4.5 percent last quarter, the most since the three months ended September 2011, the Merrill Lynch data show. The bonds returned 161 percent from the start of 2009 through May this year.

Japan’s health ministry, which oversees the pension manager, said in December that GPIF will start investing in domestic inflation-linked bonds in April. The nation’s consumer prices increased 0.2 percent in August from a year earlier. The central bank has a 2 percent inflation target, and Governor Haruhiko Kuroda said Sept. 28 that he won’t hesitate to adjust monetary policy if price trends change.

GPIF held about 13 percent of its 141 trillion yen ($1.2 trillion) portfolio in international bonds as of the end of June, up from about 11 percent a year earlier. It targets 15 percent for the asset. Domestic bonds made up 38 percent of its portfolio, local stocks accounted for 23 percent and foreign equities were at 22 percent as of June 30.


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Japan's $1.2 trillion Government Pension Investment Fund unveiled sweeping changes to its foreign bond investments, hiring more than a dozen new asset managers and creating mandates for junk debt and emerging-market securities.The fund selected external managers for eight...
pension, fund, asset managers, junk bonds
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2015-45-01
Thursday, 01 October 2015 07:45 AM
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