The largest public pension plan in the world is discussing whether it should invest in hedge funds and other high-yielding investment vehicles, Financial Times reports.
Japans Government Pension Investment Fund, which has $300 billion assets under management, currently handles domestic and foreign equities and bonds. But the Ministry of Health Labor and Welfare, the overseer of GPIF, has formed a sub-committee to broaden its base.
If the shift occurs, all public pension funds in Japan would be permitted to do the same, essentially a change in the governments opinion about hedge funds. Previously, the local stock market decline in the country had been blamed on hedge funds. Currently, investments in hedge funds in Japan total between $40 billion and $50 billion.
United States pension funds have 7.5% of assets, on average, in hedge funds, the largest amount in the world. In Europe, the number is much lower.
According to Ros Altoona, a pension economic specialist from the London School of Economics said British pension funds do not generally invest in hedge funds because of their reliance on investment consultants that favor more traditional asset classes.
One hedge fund professional told Financial Times of Japans move, "This is an extremely significant development. It sends out a signal to every other Japanese institution."