GPIF Goals
The main task facing the fund is boosting public understanding of its returns, Hirano says. The GPIF has a mandated investment return of 1.7% above nominal wage increases, with the fund targeting about 3% overall, he said.
“With rates in Japan near zero, and having declined worldwide too, getting 3% from the bond market is completely impossible,” Hirano said. “Yet there are huge numbers of Japanese who think investing in stocks is dangerous. It’s really hard to bridge that gap.”
Hirano laments the public focus on short-term losses and gains. For a fund that invests with a 100-year time frame, “to swing between sorrow and joy over quarterly results is nonsense.”
New CIO
Compared with his outspoken predecessor Mizuno, the fund’s current chief investment officer Eiji Ueda prefers to operate from the background. Despite being in the office for more than a year, Ueda hasn’t spoken publicly yet. Hirano shed some light on how Ueda, a former bond trader at Goldman Sachs Group Inc., prefers to operate.
“Ueda is building on the foundation of the previous system, taking it a step further and building a precise risk management and elaborate rebalancing strategy,” he said, adding Ueda’s key target was how much GPIF management can outperform the composite benchmark.
China Bonds
With FTSE Russell set to add Chinese debt to its benchmark global bond index from October, the GPIF is facing a dilemma over whether to put its money into China’s sovereign debt.
“The issue could have political implications,” he said. “The GPIF isn’t supposed to consider political agendas, just think of the risk-weighted return, but politics can influence the market. The GPIF is facing a difficult decision.”
This article was provided by Bloomberg News.