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Fri12152017

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Japan’s Pension Funds to Reshuffle its Asset Allocation

Japan’s largest pension fund (also the world’s largest public pension fund) – Government Pension Investment Fund (GPIF) with total assets of Y112tn ($1.17tn) or 56% of Japanese’s pension assets of Y200tn, has bowed to the Abe’s calls to overhaul its investment strategy to reshuffle its asset allocation with immediate effect. Add a comment

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Frontier Markets Outperformed Emerging Markets

The MSCI Frontier Market index (FM) has gained 13.3% in the first five months of the year – its best performance for the year to date since the index was created five years ago.  On the other hand, MSCI Emerging Markets index has fallen 4.4% for the year to the end of May.  The divergence between EMs and FMs have been stark. While frontier markets – United Arab Emirates, Bulgaria, Kenya, Sri Lanka, Nigeria, Pakistan and Vietnam – made up the seven top-performing markets this year, the nine worst-performing markets – Peru, Czech Republic, Colombia, South Africa, Egypt, Russia, Poland, Chile and Morocco – are from the emerging world. Add a comment

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US University Endowments Cut Holdings in US Bond

Many US university endowments have reduced their holdings of Treasury securities from as much as 30% in 2008-09 to zero in some cases.  The sell-off reflects a big change in the way fund managers view US government debt.  The classic view of US Treasuries to an investor is that – they are “certain” to be repaid.  But with interest rates such low, there is a concern that bond prices could fall dramatically.

{loadposition adsense_r250x250}”Treasuries were a core holding but now everyone is holding less than 5%”.  Here is what happened to some of the University Funds:

  1. Princeton’s $17B endowment has converted its Treasury holdings to cash.
  2. Duke’s $5.5B has shifted from Treasuries to US stocks with high dividends and emerging market equities.
  3. Cornell’s $5B endowment has reduced its investments in Treasury securities to just over 3% of assets.
  4. Yale’s $19B endowment had only 4% of its holdings in Treasuries.

According to one survey of 831 US universities, the average endowment lost 0.3 per cent in the fiscal year ending June 2012, with gains on holdings of government debt offsetting losses elsewhere in their portfolios.

By contrast, endowments earned an average return of 19.2 per cent in the year to June 2011.

Reference:  Financial Times, Henny Sender, 2013-05-08, “University Endowments Trim Holdings in US Treasuries”

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Japan Pension Funds to invest more in Japanese stocks

Shinzo Abe will be calling Japan’s pension funds such as Government Pension Investment Fund (GPIF) with AUM of Y112tn ($1.1tn) at the end of December – about the same size as the economies of Mexico or South Korea, to lift their allocations to domestic stocks. A new national growth strategy would be outlined at the end of next week.  Essentially, the government plans to reshape investment strategies for roughly Y200tn in assets held by 190 public pension funds and aims to complete the shifts by the end of the fiscal year ending in March 2016.

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Another Record Year for Asian Junk

Asian junk has raised 18.1 bn in the markets this year surpassed the previous high set in 2010, according to data from Dealogic.  On a year-to-date basics, the volume of cash raised has more than tripled. High yield has grown to account for more than a third of the total Asia ex-Japan credit market this year, up from just 12 per cent at the same point in 2012.

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