GPIF may mull alternative investments

By Chikako Mogi

TOKYO (Reuters) - Japan's conservatively run public pension fund, the world's largest, said it may consider alternative investments, but the sheer size of the $1.4 trillion fund limited its ability to maneuver in smaller markets. "We may consider alternative investments based on whether our risk-return improves by expanding investments to various products, and not because we need such investments when we raise our performance target," Takahiro Kawase, president of the Government Pension Investment Fund, told the Reuters Japan Investment Summit on Wednesday.

"Our asset size is so big that we need to take into consideration how big a market size is, whether our investment is realistic, risk factors, and whether it will lead to a meaningful investment diversification," he said.

The 150 trillion yen ($1.4 trillion) fund currently puts most of its money into Japanese domestic bonds and does not invest in alternative products. Sliding Japanese stock market last year saw it post a negative return on its investments in the fiscal year ending in March.

"With regards to the possibility (of investing in commodities) in the future, I cannot say at this point that there is no possibility," he said.

Kawase said, however, that GPIF needed to take into account elements such as a market's risk-and-return scenario, before deciding to add an asset class to its portfolio.

He said while GPIF needed to start studying the asset class, the commodities market could be too small for it.

Officials in Japan have debated using part of the GPIF's vast funds to form a sovereign wealth fund that could invest more aggressively for higher returns.

The Nikkei business daily reported on Wednesday that Japans' ruling Liberal Democratic Party is set to call for the establishment of a 10 trillion yen ($94 billion) sovereign wealth fund using the GPIF's money.   Continued...