Investing.com — Japan plans to increase allocations to alternative assets at the Government Pension Investment Fund (GPIF), the world’s largest pension fund, as part of a broader effort to diversify its portfolio and reduce investment risk, Reuters reported on Sunday.
The move would gradually raise the share of unlisted equities, real estate, and other alternative investments toward the fund’s existing 5% ceiling, according to the Nikkei newspaper. Alternative assets accounted for just 1.7% of GPIF’s holdings as of March.
The reported proposal is expected to be included in an upcoming government panel report outlining changes to the fund’s investment strategy. The shift would broaden the range of assets held by the roughly $1.8 trillion pension fund while seeking to improve long-term risk-adjusted returns.
The report follows comments from Finance Minister Satsuki Katayama on Friday that the government wants GPIF and other state pension funds to substantially increase investment in domestic assets. Her remarks triggered gains in the yen and as investors reassessed expectations for domestic capital flows.
Alternative investments typically include private equity, private credit, infrastructure, real estate and other assets outside traditional listed stocks and bonds. Such investments have become increasingly popular among large institutional investors seeking higher returns and greater portfolio diversification.
GPIF is one of the world’s most influential institutional investors, and changes to its asset allocation are closely watched by global financial markets given the fund’s size and its ability to influence capital flows across asset classes.
Japan’s Ministry of Health, Labour and Welfare, which oversees GPIF, was not immediately available for comment on the report.