The world?s biggest public pension fund said that it could turn to alternative assets such as real estate and private equity funds, as Japan?s pension system encounters more pressure from the aging population. According to reports, chairman Takahiro Mitani of Japan?s Government Pension Investment Fund (GPIF) has shared that they are looking for better investment returns, because they are paying out more in benefits than it receives in contributions.
Mitani adds that there are concerns on the continuously thinning number of people paying into public pension plans, especially now that more people are losing jobs and are retiring from work. Mitani explains that the GPIF will have to diversify its investment targets so they are planning to expand and include infrastructure, real estate and private equity. In fact, they have already started investing this year, hoping to diversify and generate more returns for the long term.
Despite the fact that the Japanese government has somewhat eased concerns over an increasing public debt by raising the country?s sales tax, Mitani believes that this debt could still reach a critical point in 5-10 years. Even though Japan is able to cover about 95% of its financial needs, there is also concern for the next decade because of the increasing number of retirees that could take much of their savings that could lead to borrowing from overseas lenders.
Mitani explains that the cash required for pension payouts for this financial year is about 2.5 trillion yen if the government can issue bonds for fund pension payouts. This is lower than the first expected amount, which was 8.87 trillion yen. However, despite preparations and allocations, Mitani said that the fund?s quarterly investment performance may have improved in July-September from the previous quarter but the fund has yet to release its final results for the said period.
The only concern that Mitani sees in investing in private equity firms is that there are not enough successful private equity deals in Japan. Though there are many successful investments made by private equity overseas than in Japan, Mitani assures that the GPIF would not allot money to hedge funds.
Original article: GMANetwork.comPhoto credits: illustrationsource.comTokyo Apartments For Sale | Tokyo Apartments For Rent | Real Estate Japan
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