Japan’s huge government pension investment fund has not yet decided whether to invest in Chinese sovereign debt, but small pensioners that mimic GPIF’s portfolio have put China’s debt into other emerging markets. It says that it will be treated in the same way as.
Kei Terasako and two officials of the fund, Masaharu Noguchi.
PMAC is already investing in Chinese debt as it also uses the Bloomberg Barclays Global Aggregate Index, which began including Chinese bonds in April 2019, as a benchmark.
“Liquidity risk and regulatory risk have not been realized at this time,” Terasako, manager of PMAC’s asset management division, said in an interview. From a fiduciary duty perspective, “we cannot give a reason not to include it.”
Whether GPIF, the world’s largest pension fund, should invest some of its 186.1 trillion yen ($ 1.7 trillion) in assets in China’s sovereign debt is one of the key issues facing the Japanese pension fund industry. This debate was triggered by the decision by FTSE Russell to begin adding debt to the benchmark in stages. This is widely supported in Japan.
Investing in China’s government debt can be a politically sensitive issue in Japan, given the shared history of the country, which has recently expanded into a verbal war over Taiwan’s problems. GPIF President Masataka Miyazono acknowledged that China’s debt should be considered as an option and that it needs to be cautious and “careful” due to the large amount of money GPIF manages. I haven’t given a clear answer yet.
PMAC’s assets under management were 2.8 trillion yen as of the end of March. Like other small pension funds in Japan, it uses the same portfolio structure as the GPIF set by the Ministry of Health. This will split the investment evenly into four segments: domestic and foreign equities and fixed income.
The fund emphasized that it remains flexible in the face of risks in the Chinese market. This includes time to account opening, transaction costs, and sudden regulatory impositions.
“Depending on market conditions and regulations at the time, the direction may change,” Noguchi emphasized.
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