(Tentative Translation)

Final Report

November 2013
Panel for Sophisticating the Management of
Public/Quasi-public Funds

Panel for Sophisticating the Management of Public/Quasi-public Funds
Final Report
I Introduction .................................................................................................................. 1
II Revising investment in view of the post-deflationary economy
1 Objectives of investment .......................................................................................... 3
2 Investment targets and policies …………………………………………………… 3(1) Revising portfolios that heavily invest in domestic bonds(2) Investment return targets and risk tolerance(3) Investment costs(4) Investment of surplus money
3 Portfolios …………………………...……………………………………………... 5(1) Diversifying investments(2) Ratio of active investments(3) Benchmarks of passive investments(4) Flexible revision of portfolios and hedging policies(5) Foreign-asset ratio(6) Baby funds
III Improving governance and risk management structure
1 Governance structure ……………………………...……………………………… 7(1) Relationship between funds and ministers in charge(2) Need for a collegial decision making system(3) Securing expert employees(4) Stakeholder’s participation in investment management(5) Governance structure of large institution dedicated to fund management (GPIF)
2 Risk management structure ………………………...……………………………... 9(1) Building portfolios based on forward-looking risk analyses(2) Risk management in response to diversification of investments(3) Measures in view of post-deflationary economy(4) Risk management for investment of surplus money
IV Maximizing returns on equity assets ........................................................................ 10
V Roadmap for reform of large institution dedicated to fund management (GPIF) ..… 10(Annex 1) Desirable Governance Structure(Annex 2) Roadmap for reforming fund management(Supplement 1) Investment situation of public/quasi-public funds (1) ..……………... 14(Supplement 2) Investment situation of public/quasi-public funds (2) …..……….….. 15(Supplement 3) Pension funds investing in the market ……..….……...……………... 16(Reference 1) Panel Members ……..………………………………………………..... 17(Reference 2) Meeting agendas ……………………………………………………..... 18

November 2013
Panel for Sophisticating the Management of Public/Quasi-public Funds

Final ReportI

Introduction

In Japan, more than 200 trillion yen worth of financial assets are held by
public/quasi-public funds, such as public pensions and incorporated administrative
agencies. While these entities (public/quasi-public funds) have undergone reforms fromvarious perspectives, comprehensive and cross-cutting review focusing on theirinvestment management had never been made.
Recently, in order to exit from the prolonged deflationary recession and to revitalize
the Japanese economy, the Abe administration, which was established in December
2012, has been pursuing an economic policy consisting of three pillars (called “three
arrows”): (i) aggressive monetary policy, (ii) flexible fiscal policy, and (iii) growthstrategy for stimulating private investment (Abenomics).
This panel, the Panel for Sophisticating the Management of Public/Quasi-public
Funds, was established under the minister in charge of economic revitalization pursuant
to the “Japan Revitalization Strategy” (decided by the Cabinet on June 14, 2013) which
was formulated as part of the growth strategy for stimulating private investment (the“third arrow” of Abenomics). The purpose of the panel is to provide, bearing in mind
the scale and nature of each fund, recommendations on cross-cutting issues pertaining to
public/quasi-public funds, such as investment (promotion of diversified investment);
matters of governance, including risk management structure; and measures for
improving the returns on long-term investments in shares.
(Reference) Japan Revitalization Strategy (Cabinet decision on June 14, 2013)
1. Industry Revitalization Plan –revitalizing human talents, goods and funds
5. Further strengthening Japan’s international competitiveness as a business hub(6) Management of public and quasi-public funds
The government will consider ways to desirably manage public pensions andfinancial assets held by incorporated administrative agencies, etc. (public and1quasi-public funds).
Desirable management of public and quasi-public funds
At meetings among intellectuals, bearing in mind the scale and nature of eachfund, the government will review and obtain recommendations by autumn oncross-cutting issues pertaining to public and quasi-public funds, such as:
the management of funds (promotion of diversified investment); matters ofgovernance, including risk management structure; and measures to increase
returns on long-term investments in shares.
The panel met for the first time on July 1, 2013, and has had eight meetings in total.
In the meetings, the panel discussed the above-mentioned topics and deliberated on thecurrent situation of investment by public and quasi-public funds, which are subject tothe panel’s review, as well as by other fund management institutions inside and outside
Japan. During the course of the discussions, on September 26, 2013, the panel compiled
the Preliminary Report summarizing the issues it has discussed based on its
deliberations. The panel then continued discussions, and has finally concluded to makethe following recommendations with regard to cross-cutting issues for achieving a moresophisticated investment by and risk management structure of public/quasi-public funds
in Japan.
It should be noted that, as listed below, the panel primarily focused on the funds forwhich the government is involved in managing, such as those being uniformly regulated
by law or ordinance. However, since these funds vary in sizes and characteristics, theapplication of each recommendation indicated in this report to each fund should bebased on their respective sizes and characteristics.
(Public/quasi-public funds studied by the panel)- Public pensions (Government Pension Investment Fund (GPIF), National PublicService Personnel Mutual Aid, Local Public Service Personnel Mutual Aid, andPrivate School Personnel Mutual Aid)
- Incorporated administrative agencies, etc. (incorporated administrative
agencies excluding the GPIF, national university corporations, etc.)2

II Revising investment in view of post-deflationary economy
1. Objectives of investment
With the aim of exiting from the prolonged deflationary recession, the Abeadministration is making efforts to push forward the growth strategy as the third
arrow of Abenomics, in addition to the first arrow of aggressive monetary policy andthe second arrow of flexible fiscal policy. As the panel is holding a discussion as partof such efforts, there is a view that it should take into account how the relevant
investment can contribute to the Japanese economy. However, it must be noted thattrustees of these funds are required to invest funds for their respective objectives
according to relevant laws (for example, public pension funds are required to invest
solely for the benefit of people covered by public pension plans).
Meanwhile, investment of public pension funds is closely related to pension
finance and pension systems and is expected by the people to contribute to securing
the long-term sustainability of the pension finance system without affecting future
pension benefits or leading to a hike in premiums paid by working generations.
Investment to benefit the insured will eventually contribute to the Japanese economy,
while in turn, each fund will benefit from economic growth through their investment.
Therefore, a virtuous cycle of economic growth and investment is expected.

2. Investment targets and policies(1) Revising portfolios that heavily invest in domestic bonds
Present investment portfolios of public and quasi-public funds that invest heavily
in domestic bonds need to be revised to improve returns and hold down interest raterisks, considering the current situation of the Japanese economy, which is shiftingfrom deflation to a mild inflationary environment. When doing so, depending on
the features of liabilities of each fund, investment portfolios for portions other thanwhere reserves are expected to be tapped in the near future should be structured
from a long-term perspective.
(2) Investment return targets and risk tolerance
Since benefits paid out from some funds are linked to nominal wage growth rateand inflation rates, it is reasonable to set investment return targets as specific rates
above the nominal wage growth rate or inflation rates. However, under the3

deflationary economy, those investment targets might have been too low.
Meanwhile, in view of the post-deflationary economy, the targets may become
higher than the present level in the future. In light of these factors, it is necessary toappropriately set investment return targets, as well as to consider the risk tolerance,(Note 1)
which is inextricably linked to investment return targets.
Investment return targets should be set taking into account the relationshipbetween assets and liabilities. Building portfolios to attain these targets will lead toa “safe and efficient” investment. It is also necessary to make sufficient
return-maximizing efforts, including an upward shift of the efficient frontier
indicating the relationship between expected returns and risks through measures
such as diversification of investments.
(Note 1) After setting a risk tolerance level based on historically observed return
fluctuations, it is desirable to conduct forward-looking examination on therisk tolerance level by using risk measurement models and conducting
scenario analysis (see also III 2. (1)).
(3) Investment costs
Each fund has been trying to reduce brokerage fees in order to minimize
investment costs, leading to a fall in brokerage fees to internationally low levels.
This fact can be welcomed, but it may have led the funds to fail in acquiring
sufficient information and to lose precious investment opportunities. It may also
have hindered the development of financial and capital markets. While moresophisticated investment could lead to a rise in brokerage fees and other costs, insuch case, each fund is accountable for increasing its net return in line with the risein costs.
(4) Investment of surplus money
Incorporated administrative agencies (excluding the GPIF) and national
university corporations invest surplus money in safe assets in principle. Dependingon the sizes and characteristics of their funds, however, there is a need to adopt a
middle-risk, middle-return approach to improve investment returns on the premiseof appropriate risk management.

4

3. Portfolios(1) Diversifying investments
Under a long-term outlook on benefits and contributions in pension finance, theGPIF and the like should diversify investments by investing in new types of assets(including real estate investment trusts, real estate, infrastructure, venture capitals,
private equities and commodities). This should be done taking into consideration
the investment models of advanced public pension funds at home and abroad, as
well as the market environment development, after establishing the risk
management structure discussed below (see III 2. (2)).
Meanwhile, if new types of assets were to be introduced, each fund, taking into
account their respective characteristics, would be accountable for gaining people’s
understanding.
(Note 2) Some pointed out that while investment diversification could lead theseinvestors to be deemed as sovereign wealth funds, there would be no
problem as long as they comply with the 2008 internationally agreed codeof conduct known as the “Santiago Principles.”(2) Ratio of active investments
Currently, the ratio of active investments is generally low (for example, at GPIF,
about 20 percent of domestic equities is actively managed). Consideration should
be made to increase the ratio of active investments, depending on the size andcharacteristics of each fund (Note 3).
In active investments, it is sometimes unclear whether the net return will behigher than that of passive investments due to a rise in transaction fees or
performance fees. However, although it takes some time to secure necessary
personnel and to establish systems, by managing in-house, large fund managers
may be able to reduce costs compared to outsourcing management.
In order to implement efficient risk management while increasing the mobility
and flexibility of investment, as a part of investment diversification, one possibility
would be to specially manage some active investments as baby funds (see II 3. (6)).
(Note 3) Increasing the ratio of active investments will also contribute to improvethe efficiency of the market.
(Note 4) Regarding investment management methods, active or passive is one
perspective, while in-house or outsourced is another. While most of theinvestments by public/quasi-public funds are outsourced, accumulation of
investment knowledge and experience as well as market information can be
expected through in-house management.

5(3) Benchmarks of passive investments
Higher returns should be aimed at by selecting benchmarks ingeniously. As abenchmark for passive investments in stocks, many funds track the TOPIX index,
which covers all the companies listed on the first section of the Tokyo Stock
Exchange. Given that TOPIX includes stocks lacking sufficient investment
profitability, funds should consider improvements including tolerating somedeviation from the index or using other indexes that enable more efficientinvestment (including, for example, the use of a new stock index which has been
jointly developed by the Japan Exchange Group and Nikkei Inc. and is due to be
introduced at the beginning of 2014 (the JPX-Nikkei 400), that takes into accountfactors such as return on equity (ROE)). Moreover, while some funds choose to
manage bond portfolios by index investment, the rationality of such decision should
be reexamined from the viewpoint of risk management.
(4) Flexible revision of portfolios and hedging policies
It is true that an investment approach from a long-term perspective is efficientand that portfolio-rebalancing restrains excessive fluctuations in financial markets.
However, in view of the recent rapid changes in economic and market
environments, it is also important to review portfolios in a timely manner and revise
them as required. Accordingly, taking into account the sizes and characteristics ofthe funds, a more flexible revision of portfolios, including hedging policies, should
be considered.
(5) Foreign-assets ratio
Raising the foreign-assets ratio of a portfolio is an effective way of diversifying
investments and does have an advantage in having only a small impact on thedomestic markets if the reserves are tapped. One the other hand, a decrease ininvestment in domestic assets could affect the domestic economy. Each fund should
appropriately determine its foreign-asset ratio taking into account these factors.
(6) Baby funds
A baby fund is a certain amount set within the fund’s policy asset mix, which isinvested in an independent and flexible manner (it may be managed in-house oroutsourced). A baby fund could be used to deal with investments across different
classes of assets or to especially deal with investments in new types of assets.

6

Investment may be outsourced by indicating risk tolerance and receiving proposals
of asset class options from fund managers. Since a baby fund is relatively small, it
can have an advantage in that its portfolio can be substantially changed without
having an impact on markets.

III Improving governance and risk management structure
1. Governance structure(1) Relationship between funds and ministers in charge
For some funds, the minister in charge holds the ultimate responsibility for theinvestment. Consideration should be given so that such governance structure will
not undermine the independence and creativity of the funds.
In the case of a public pension, in particular, the minister in charge serves as theminister in charge of supervising the fund as well as the insurer of the pension.
Even in such case, the governance structure should allow funds to fully demonstrate
independence and creativity on the premise that the minister has the responsibility
to appoint the president while the fund has a fiduciary responsibility as a trustee tothe minister.

(2) Need for a collegial decision making system
In order to manage funds, appropriate organizational arrangements are required
for funds to fulfill their fiduciary responsibility as trustees. As far as the presidentof the organization has the sole decision-making power and responsibility under thecurrent non-collegial decision-making system, however, depending on the size andcharacteristics of the organization, this system may fail to function adequately. A
more desirable structure would be a collegial decision-making system where
full-time experts, with consideration given to conflict of interest, play a central rolein collegially making decisions on key investment.
(3) Securing expert employees
In order to diversify investments and to enhance risk management, it is essential
for each fund to introduce leading experts and dedicated pay systems for thoseexperts. Therefore, in order to enable funds to appropriately secure experts andenhance risk management depending on their sizes and characteristics, flexible

7

treatment should be allowed with regard to the restrictions on the number of
employees, the wage levels, and expenses of incorporated administrative agencies
that have been decided by the Cabinet.
(4) Stakeholders’ participation in investment management
A governance structure to reflect the views of employers and employees who pay
pension premiums is required at public pension funds. However, since people
covered by a public pension scheme include citizens of various generations andpositions, and as such funds concern the issue of national burden to maintain thepension system as a part of social security, including tax, stakeholders appointed to
the funds’ governing body are required to act with due consideration to the interestsof all citizens.
(5) Governance structure of large institution dedicated to fund management (GPIF)
Incorporated administrative agencies have a non-collegial decision-making
system. In addition, there are restrictions on aspects such as the number of
employees, wage levels, and expenses. Large institution dedicated to fundmanagement (GPIF) particularly need to be reformed in light of their sizes andcharacteristics.
Therefore, from the perspective of fund management, by enacting new legislationin light of the recommendations made in III 1 (1)-(4), such institution should bereformed to a legal entity established based on a governing law specific to that
institution. A collegial governing body should decide important policies, andemphasizing the expertise required, the governing body should be given a high levelof autonomy and independence on the premise of appropriate information disclosure.
Members of the governing body should be selected with a transparent method fromamong people who have sufficient knowledge of finance and investment. In thatcase, in light of the OECD Guidelines for Pension Fund Governance, it is desirable
to appoint an officer responsible for operations, separate from the chairman of thegoverning body, in order to segregate the oversight function and the operational
function (Pattern 2 in Attachment 1). However, whether it is appropriate to empower
the chairman of the governing body to execute operations (as shown in Pattern 1 in
Attachment 1) needs to be further discussed in the legislation process considering
the corporate governance practice in Japan.
As a transitional measure until the new legislation is complete, it is necessary topush forward reforms that can be made while still taking the form of incorporated

8

administrative agencies. Accordingly, a transitional structure should be developed
whereby multiple full-time members are posted to the investment committee, which
practically decides on important investment policies, and the president executes theoperations based on such decisions. Naturally, the president, directors, andinvestment committee members should be appointed from those who have noconflicts of interest, and a confidentiality obligation should be imposed on them.
Meanwhile, restrictions on the number of employees, the wage levels, and expenses
based on Cabinet decisions should be eased as much as possible to increase theexpertise of the president, directors, investment committee members, andinvestment staff.
In light of the need to hold close communication with the markets, large
institution dedicated to fund management (GPIF) should be headquartered in Tokyo.
2. Risk management structure(1) Building portfolios based on forward-looking risk analyses
Public pension funds should conduct forward-looking risk analyses coveringboth assets and liabilities in view of future economic outlooks (covering interest
rates, inflation rates and other macro variables) to build its investment portfolio.
Risk analyses based only on historical data are insufficient.
(2) Risk management in line with diversification of investment
When GPIF and the like diversify investments, they are likely to face increased
risks associated with the characteristics of the new investments, and in some cases,
continuous market value assessment of assets may become difficult. Therefore,
efforts will be required to build a risk management structure for each investment
program, including allocation of employees with expertise, and to reinforce theframework for managing the risks the entire fund faces in an integrated manner.
(3) Measures in view of post-deflationary economy
It is necessary to consider sufficient risk management and asset assessment inview of interest rate hikes after Japan’s departure from deflation, and to takerelevant measures promptly. From such a viewpoint, for example, investment ininflation-linked government bonds, which the government started to reissue
recently, should be considered.

9(4) Risk management for investment of surplus money
Despite the existing rule that limits the scope of assets for incorporated
administrative agencies’ surplus money investment to safe assets, there are cases
where agencies have invested surplus money in structured investment products andincurred heavy losses. They need to implement risk management measures meeting
fund sizes and investment realities, including the adequate use of market prices infund management.

IV Maximizing returns on equity assets
Each fund, when investing in equity assets including stocks, is required to aim to
improve returns on the premise of investing from a long-term perspective. For thispurpose, each fund, even if its standing is public or quasi-public, needs to hold close
dialogues with investment targets and exercise voting rights appropriately through aninvestment outsourcer. To this end, each fund needs to publish a policy based on theoutcome of the Financial Services Agency’s ongoing consideration of the Japanese
stewardship code and urge investment outsourcer to comply with the policy. However,care should be taken to prevent excessive involvement of the fund itself in the
management of the investment target’s business or formal exercise of voting rights
based on an across-the-board policy. From such perspective, utilization of investment
outsourcers that aim to sustainably enhance corporate value through dialogues withinvestment targets based on a favorable relationship may be an option (note 5). Somepanel members are of the opinion that ESG (environment, society, governance)
factors should be taken into account in addition to financial factors, and each fundshould individually consider this matter.
(Note 5) Use of a proxy advisor may become an option if such an advisor withadequate understandings of the management of Japanese companies andoperated under appropriate governance structure becomes available in Japan.

V Roadmap for the reform of large institution dedicated to fund management (GPIF)
In the process of administrative reform to date, large institution dedicated to fundmanagement (GPIF) has streamlined its organization and carried out investments
focusing on safety and efficiency. From now on, it needs to start revising its portfolios

10without falling behind the changes in the economic and market environments, and tocontinuously revise its governance, including its management of risks, consistent withportfolio revision. From such perspective, the panel sorted out the improvements to betaken by such organization chronologically, and decided to make specificrecommendations as follows: (i) issues to be addressed immediately, (ii) issues to beaddressed in about one year, and (iii) targets to be achieved after legal revision (theroadmap shown in Attachment 2).
When proceeding with the reform, it is important to implement portfolio revision ineach phase together with the corresponding revision of the governance structure,including risk management, as a set. The panel hopes for prompt and steady progressof the reform.
Bearing in mind the sizes and characteristics of each fund, three mutual aid
associations (i.e. pension funds for employees of the national public service, local
public service, and private schools) and other large fund managing institutions need topromptly revise their investment and risk management as well, referring to theroadmap shown in Attachment 2.

11

(Annex 1)

Desirable Governance Structure(Pattern 1)(Pattern 2)

Minister in charge of the fundMinister in charge of the fundReportingSetting the mid-term goals
and degree of risk-tolerance

Appointment of thechairman and otherboard members

ReportingSetting the mid-term goals
and degree of risk-tolerance

Appointment of thechairman and otherboard members

Board of Directors
Board of Directors

Decision Making

Decision Making

12

Request for approvalof specific investment
plans and policies;
reportingAppointment of Managing Directors;
setting out the fund’s key policies
regarding investments; determining
specific investment plans andpolicies; performance assessment;
monitoring and oversight

Chairman of the Board（CEO), Managing Directors

Investment
Committee*

Appointment of CEO and otherexecutive officers; setting out
the fund’s key policies regarding
investments; determining specificinvestment plans and policies;
performance assessment;
monitoring and oversight

Request for
approval of
specific
investment
plans andpolicies,
reportingCEO (and other executive officers）

Administration

Administration
Investment Committee

instruction

instruction
staffsstaffs(*) The board deliberates and decides on the key goals and main policies such as policy asset mix and asset classes,
while more specific investment plan and policies are deliberated and decided at the investment committee
consisting of the members of the board and others where appropriate. Establishment of other sub-committees suchas risk management committee and governance committee should also be considered.

(Annex 2)

Roadmap for Reforming Fund Management
Issues to be addressed immediatelyInvestment
Reform(Diversifying
investments etc.)

Revise investments within the current 
policy asset mix (flexible investmentusing the permissible range ofdeviation, reviewing active investment) 
Consider investment return targets anddegree of risk tolerance
Consider the use of new benchmarks in 
passive investments

Issues to be addressedin about one year
Decide on a new policy asset mix
based on the results of thereexamination of pension finance
Invest in new types of assets (mainly
in liquid assets and assets that can beevaluated without difficulty)
Establish baby funds

Goal to be achieved

Invest in new types of assets(including illiquid assets andassets of which constantevaluation is difficult)13

Reforms of investment and governance must be implemented as a set

RiskManagement
Reform

Governance
Structure
ReformConsider and implement measures for 
risk management in preparation for
inflation and interest rate hikes (such as
investment in inflation-linked bonds,
using derivatives for risk-hedging)Consider forward-looking risk analysis

Build a portfolio based on forwardlooking risk analysis taking into
account the results of thereexamination of pension financeImplement risk management
measures corresponding toinvestment in new types ofassets (including illiquid assets
and assets of which constantevaluation is difficult)Introduce incentive fees based on mid- 
to long-term performance of outside
portfolio managers
Consider securing leading experts

Make investment committee
membership a full-time position
following the relaxation oflimitations on the number of
employees, wage level, and costs;
hire leading experts



Establish a governing body anda fund management system witha high level of expertise byreforming to a new type of legal
entityInvestment Situation of Public/Quasi-public Funds (1)(Supplement 1)<Public Pension Funds>
Government Pension
Investment Fund(GPIF)

Federation of National
Public Service Personnel
Mutual Aid Association(KKR)

Pension Fund
Association for
Local Government
Officials(Chikyoren)

The Promotion and
Mutual Aid Assoc.
for Private Schoolsof Japan(Shigaku Kyosai)

120.5 trillion yen

7.8 trillion yen

17.5 trillion yen

3.6 trillion yen

Domestic Bonds

60% (±8%)80% (±12%)64% (±5%)65%（±9%）Domestic Equities

12% (±6%)

5% (±3%)

14% (±5%)10%（±3%）Foreign Bonds

11% (±5%)0% (+1.5%)

10% (±5%)10%（±3%）Foreign Equities

12% (±5%)5% （±3%）

11% (±5%)10%（±3%）

Short-term Assets
1%(+3%, -1%）

Short-term Assets
5%

Total Value(end of March 2013)

Policy Asset Mix

14

Short-term assets
5%

OthersShort-term Assets
4% (±4%)
Real estate 2% (±2%)
Lending 4% (±4%)*GPIF’s policy asset mix before its revision on June 7, 2013: Domestic bonds 67%, domestic equities 11%,
foreign bonds 8%, foreign equities 9%, short-term assets 5%.

<Investment Performance>(% annually)

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012

GPIF

8.4%

3.4%

9.9%

3.7%

-4.6%

-7.6%

7.9%

-0.3%

2.3%

10.2%

KKR

3.8%

2.7%

5.4%

2.8%

-0.5%

-3.9%

5.5%

1.2%

2.1%

5.1%

Chikyoren

9.6%

3.8%

12.3%

4.0%

-4.4%

-8.9%

8.0%

-0.2%

2.5%

9.8%

Shigaku Kyosai

2.6%

3.4%

5.8%

4.1%

-2.8%

-7.6%

8.3%

0.2%

1.8%

9.2%

(Supplement 2)

Investment Situation of Public/Quasi-public Funds (2)<Independent administrative agencies with more than 50 billion yen worth of financial assets as fixed assets> (100 million yen)
Independentadministrative
agencies

Supervisory
authority

Total
AssetsMETI

Financial Assets

Financial Assets

Performance

15

Money
trust

(Liquid
assets)0029,9248,476

016,7893,522

21,7691,000

024,1533,919

019,788

2,960

1,687

468

0

1,219

436

342

0

0

156

3,280

891

891

0

0

587

314

0

0

15

METI

13,202

871

565

0

0

1,490

366

0

0

7

MAFF

4,752

839

839

0

0

3,753

71

0

0

15

MOE

3,099

826

656

41

0

1,743

1,318

0

0

13

Japan Arts Council

MEXT

2,415

733

502

133

0

78

25

0

0

15

Japan Foundation

MOFA

761

547

461

79

0

98

41

5

0

12

Total of all independentadministrative agencies(100 agencies excluding GPIF)

1,904,504 86,485

82,866

1,395

1,239

419,368

48,666

5

42,625－National University Corporation（total of 86 corporations）

97,943

703

8,417

1,558

(Others)243

Organization for SMEs andRegional Innovation, Japan
Organization for Worker’s
Retirement Allowance
Mutual Aid
Farmers Pension Fund
Agriculture, Forestry,
and Fisheries Credit
Foundation
Japan Oil, Gas and Metals
National Corporation
Agriculture & Livestock
Industries Corporation
Environmental Restoration
and Conservation Agency(Fixedassets)Domestic Foreign
bonds
bonds

114,078

55,15355,080MHLW

56,19922,769

MAFF

6,296

MAFF
MOF

936

(Others)
234

Domestic Foreign Moneybonds
bonds trust(FY2012)(Note 1) METI: Ministry of Economy, Trade, and Industry; MHLW: Ministry of Health, Labour, and Welfare;
MAFF: Ministry of Agriculture, Forestry and Fisheries; MOF: Ministry of Finance; MOE: Ministry of the Environment;
MEXT: Ministry of Education, Culture, Science and Technology(Note 2) Fixed assets are deposits with a maturity of one year or more, securities held for trading, and securities other than JGBs, local
government bonds, government guaranteed bond and other bonds that are maturing within a year.
(Note 3) Figures of Organization for SMEs and Regional Innovation, Japan are as of the end of March 2012.

－

(Supplement 3)

Pension Funds Investing in the Market
U.S.A.
(State/Local Gov.)

CanadaNorwayCanadaPension Plan
Investment Board(CPPIB)
About 25 trill. yen About 17 trill. yen
California
Public Employees’
Retirement System(CalPERS)

Total Assets(end of June 2013)

Policy Asset Mix

Domestic
Bonds
Foreign
Bonds
Domestic
Equities
Foreign
Equities（end of March 2013）

17%
5％
10%
64％
55％

(Corporate Pension)

National Pension
Fund(AP1-４)

Pension Fund
Association(PFA)

About 11 trill. yen

10.7 trill. yen（end of March 2013） （end of December 2012）16

Foreign Bonds
35-40％

39％

36-38%

Foreign Equities
60％

31％

46-53 ％

Real estate,
infrastructure, PE,
alternative investments
30％

Real estate, PE etc.
11-17％

4,143

248

Real estate 15％
Liquid assets 4％―

Real estate etc.
up to 5％

2,626

906

336

Number of
Employees<Performance>(end of March 2013)

Japan

SwedenGovernment
National Civil
Pension Fund
Pension Fund
Global(ABP)(GPFG)
About 67 trill. yen About 34 trill. yen

30％

OthersNetherland（end of March 2013）

Policy asset mix isdynamically-set inaccordance with thefunding level:
Funding level below
100%
Bonds 57％
Equities 43％↓
Funding level over
115%
Bonds 80％
Equities 20％

153(Note 1) Canada’s Policy Asset Mix is of the reference portfolio (actual investment including real estate, infrastructures, and etc.).
(Note 2) Swedish AP1-4’s asset mix is the actual portfolio at the end of 2012. Total assets and number of employees are the total of AP1-４ funds.
(Note 3) PFA’s assets include those transferred from employees’ pension fund (portions of which were managed on behalf of the public pension).
(Note 4) “Number of employees” listed above may include (a) those not directly associated with fund management, and (b) members of the board.
(Note 5) Total assets are calculated at the following rate: 1USD=98JPY, 1EUR=118JPY, １CAD=90JPY, 1NKR=16.02JPY, 1SEK＝12JPY(% per annum)

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012

CalPERS

23.3

13.4

11.1

15.7

10.2

-27.8

12.1

12.6

1.1

13.3

CPPIB

17.6

8.5

15.5

12.9

-0.3

-18.6

14.9

11.9

6.6

10.1

GPFG

12.6

8.9

11.1

7.9

4.3

-23.3

25.6

9.6

-2.5

13.4

ABP

11.0

11.5

12.8

9.5

3.8

-20.2

20.2

13.5

3.3

13.7

AP1

16.5

11.4

17.5

9.8

4.8

-21.7

20.4

10.3

-1.7

11.4

PFA

21.2

5.8

22.7

5.6

-9.9

-18.3

17.9

-0.5

2.1

15.4

(Note) FY of CPPIB and PFA are from April to March the following year, while FY of others funds are from January to December.

(Reference 1)
Panel for Sophisticating the Management of Public/Quasi-public Funds
Members

Professor Takatoshi ITO (Chairman)
Faculty of Economics and Dean, Graduate School of Public Policy
The University of Tokyo
Mr. Masaaki KANNOManaging Director, Economic Research
JP Morgan Securities Japan Co., Ltd.
Mr. Mitsumaru KUMAGAI
Chief Economist, Economic Research Department
Daiwa Institute of Research Ltd.
Mr. Soichiro SAKUMA
Chairman, Sub-Committee on Corporate Law, Keidanren(Managing Director and Board Member, Nippon Steel & Sumitomo Metal
Corporation)
Mr. Isao SUGAYAFormer Assistant General Secretary
Japanese Trade Union Confederation (JTUC-Rengo)
Mr. Sadayuki HORIE
Senior Researcher, Financial Technology & Market Research Department
Nomura Research Institute
Professor Yasuhiro YONEZAWA
Graduate School of Finance, Accounting and Law
Waseda University

17

(Reference 2)
Panel for Sophisticating the Management of Public/Quasi-public Funds
Meeting Agendas

Meeting Agenda#1
July 1- About the Panel#2
July 30- Hearing on the current situation of investment by public pension
funds(Government Pension Investment Fund (GPIF) / Ministry of Health,Labour and Welfare; Federation of National Public Service
Personnel Mutual Aid Associations (KKR) / Ministry of Finance;
Pension Fund Association for Local Government Officials / Ministryof Internal Affairs and Communications; The Promotion and Mutual
Aid Corporation for Private Schools of Japan / Ministry of
Education, Culture, Sports, Science and Technology-Japan)#3
August 23- Hearing from Ontario Municipal Employees Retirement System(OMERS)- Hearing on the current situation, etc. of investment of independentadministration agencies and national university corporations(from Ministry of Internal Affairs and Communications and Ministryof Education, Culture, Sorts, Science and Technology-Japan)#4
September 12- Hearing on fund management from Mizuho Pension ResearchInstitute Ltd. and Pension Fund Association#5
September 26- Discussion for the Preliminary Report#6
October 15- Discussion for revising the governance structure including risk
management, etc.

#7
October 30- Discussion for the Final Report#8
November 20- Discussion for the Final Report18