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Banking & Finance

Japan's pension giant steps into real estate

GPIF diversifying portfolio away from stocks and bonds

The Government Pension Investment Fund has been taking on riskier assets due to historically low bond yields.

TOKYO -- Japan's Government Pension Investment Fund is starting to actively invest in domestic real estate funds in a bid to boost its returns.

On Tuesday, the GPIF chose Mitsubishi UFJ Trust and Banking to manage its holdings in that asset class. The pension giant will adopt a "fund of funds" strategy -- managing funds that invest in other funds -- for the first time.

The GPIF has already decided to diversify its portfolio away from stocks and bonds. The entity will invest up to 5% of its 156 trillion yen ($1.37 trillion) holdings in alternative assets such as infrastructure projects, private equity and real estate. The fund has been looking for outside asset managers specializing in those areas since April. Real estate under Mitsubishi UFJ Trust, a member of Mitsubishi UFJ Financial Group, will be the first out the gate.

Unlike equity and bond markets, alternative markets are still in the process of being established, and trading is restricted. But alternative assets often bring comparatively higher returns than the traditional instruments.


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