Japan’s €950b state pension fund to invest 3-4% in global real estate

The Government Pension Fund of Japan (GPIF) plans to invest 3-4% of its $1 tln (€950 bn) global investment portfolio in real estate as part of plans to shift away from dismal returns on bonds and focus on higher-yielding assets.

GPIF - the world's largest state pension vehicle - initially announced in October last year that it was to introduce alternative assets including real estate in its new policy asset mix within a maximum of 5% in order to ‘to achieve efficient investments by diversification, policy’.

The fund is now considering a 3 to 4% exposure to real estate globally, according to Colliers International’s regional research director Damian Harrington. This would involve up to €40 bn of new capital being poured into gateway cities across the globe, including London and Paris.

‘This decision is a result of demographic pressure and the need for higher returns,’ Harrington said.

The move by GPIF is a reflection of the structural shift in pension firms’ long-term asset allocation strategy, and not merely a short-to-medium term remedy to compressed bond yields, according to market experts.

Global pension funds’ asset allocation to alternative Investments increased from 5% in 1995 to 19% in 2012, according to Tower Watson’s Global Pension Assets Study.