JAPAN - Global Pensions has discovered highly progressive proposals which argue the world's biggest pension fund should be split.
The story is featured in the May issue of Global Pensions.
The proposals, on the website of the Japanese Financial Services Agency (FSA), go into detailed analysis as to how the Y160trn (US$1.35trn) Japanese Government Pension Investment Fund (GPIF) could be better managed.
According to the website, Takumi Shibata, president and CEO of Nomura Asset Management and member of the Financial System Councils’ Study Group, presented a proposal on 13 March that suggested the GPIF should be divided into ten CalPERS-sized funds in an attempt to bolster returns.
Under Shibata’s proposals, a board of trustees would be established to perform fiduciary responsibilities on behalf of beneficiaries. The president of GPIF would report to this board.
Currently, the president of the GPIF reports to the Ministry of Health, Labour and Welfare, which answers to the Japanese parliament, leading to concerns over political interference.
Speaking to Global Pensions, Shibata said: “The proposals I presented were part of the wider constructive debate about the challenges facing the GPIF. The objectives of this debate are to present possible options as to the best way forward for the GPIF, given the pension challenges ahead.”
Taro Ogai, consultant at Watson Wyatt in Tokyo, said it had become clear the GPIF was now becoming too large. “While there can be clear economies of scale, there also comes a point where there are diseconomies of scale. The GPIF may have reached this point.”
Ogai said one of the biggest impacts of any changes could be the modernisation of the governance structure.
He suggested low wages could be putting off some potential employees, and a change of structure could act as a catalyst for wider industry change. The GPIF has just Y1.4bn a year to cover operational costs, including salaries.
Justin Balogh, senior managing director, State Street Global Markets, commented: “It is worth pointing out that this discussion is fairly nascent. It’s clear any such change in the organisational structure of a significant public sector entity could represent a substantial shift in the Japanese pension landscape.”
Stephen Barber, group managing director at Pictet, warned: “These things tend to move at a glacial pace.”
In recent press articles, Kotaro Tamura, parliamentary secretary of the cabinet office for economic and fiscal policy and financial services, admitted policy makers thought the GPIF had grown too big and was achieving low returns.
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