There has been some ambiguity about what being a long-term investor means. For Australia’s Future Fund it means focusing on a few key aspects of our investments: understanding value, the ability to make and implement portfolio decisions and manager alignment.

In this speech at the ASFA Global Investment Forum on infrastructure and long-term investment, Raphael Arndt, head of infrastructure and timberland at the Future Fund discusses how the fund designed a new way of engaging with the infrastructure manager community including a new way of looking at performance fees.

To read the speech click here

Long term investing

The $54 billion United Nations Joint Staff Pension Fund has adapted to be more dynamic in its asset allocation, a result of lessons learned from the crisis and new stress-testing capabilities. The belief in active management still resonates with the fund beating its 10-year policy objectives. Amanda White spoke to the director of the investment management division (chief investment officer), Suzanne Bishopric.

One of the more recent modern investment questions is: what is the ultimate allocation to cash?

Suzanne Bishopric, director of the investment management division of the United Nations Joint Staff Pension Fund, is not a fan of “negative cash” and she says the fact that the practice was widespread and accepted was “emblematic of the time”.  Cash was seen to be a drag on performance, and compared with high returns in illiquid asset classes, seemed a costly place to allocate funds.

She points to a number of university endowments, which on the eve of the financial crisis followed the “negative cash” approach.

“A target of negative 5 per cent sounded low and reasonable, but when the crisis hit the effect was detrimental.  A financial crisis is not the optimum time to apply for a loan or to ask for increased donations” she says.

By contrast, the UNJSPF was overweight cash which meant it could rebalance. But now Bishopric says the question is whether the fund has too much cash which might be acting as a performance drag.

“Cash doesn’t beat inflation, so you want to deploy it properly. But in 2008 everything went down.  There was a correlation of 0.99 among asset classes,” she says. “Some universities had to sell publicly-traded equities at the bottom of the market because of liquidity pressures. My own alma mater, Harvard, was also challenged by underwater swaps.

UNJSPF is relatively new to private equity and only has a 2 per cent allocation now. The plan is to invest around 1 per cent of the fund per year until about 7 or 8 per cent, with Bishopric keen to be thorough in due diligence and also ensure a diversity of vintage years.

“We’ll take a slow and steady approach and take stock around a 7 or 8 per cent allocation, eventually we’ll match the allocations of the Australian or Canadian funds,” she says.

 

While UNJSPF was overweight cash in 2008 it was not immune to the crisis, and also lost money.

The lesson, Bishopric says, is not to be overconfident about assumptions.

“We need to look at everything all the time,” she says. “We try to have a long-term view but there are some periods like in 2011 where there were lots of twists and turns and the reaction is to just get out of everything. But at $40 billion you can’t.”

She says now the whole industry is assessing what asset allocation means, and her fund is looking at different ways to slice the portfolio so it can be viewed in different lights.

“With our own risk management software we look at the total portfolio every week and stress test it every week using historical and imaginary scenarios. It’s helpful for decision making to see how different things move in different parts of the portfolio.”

“We assess what lower rates of economic growth globally, or within emerging markets, might mean, we then extend that and assess the effect on base metals and commodities and we realised they were embedded in lots of other parts of the portfolio as well, like in very sound mining companies.”

While Bishopric is loath to predict the future, she does say she expects lower interest rates “will be with us longer than we think”.

The surprise of 2014, she says, is that interest rates went even lower, and the number of countries running negative interest rates is at a record level.

“We saw this in the 1970’s when there was different pressure on the US$,” she says. “But I think low interest rates as a way to stimulate the economy has been over-used, it’s unnerving.”

As a result, UNJSPF is at the lowest level of its fixed income range – the allocation is 31 per cent plus or minus 7 per cent, and it is now at 24 per cent. “We’ve remained overweight the benchmark, it’s been a great equities year everywhere.”

At the end of December 2013 the fund’s asset allocation was 65.4 per cent in equities, 24.7 per cent in bonds, 5 per cent in real assets, 3.6 per cent in short term, and 1.4 per cent in alternatives.

The fund’s members are truly global, coming from 23-member organisations including the United Nations, the World Health Organisation, and the International Criminal Court (its most recent Pension Board meetings were held in Rome, hosted by FAO). In line with these liabilities, the fund has investments in 38 countries and 23 currencies.

It has invariably been overweight emerging markets, but Bishopric is selective.

“They can do well, but we need to use good judgement in where to allocate, both at a country and stock level,” she says.

It’s an investment philosophy that resonates at all asset class levels, with the fund a strong believer in active management.

For example within fixed income the allocations are very underweight the Japanese yen but overweight peripheral Europe, such as Poland, which worked well last year.

 

Bishopric and her team will continue to invest with caution.

“It’s a choppier year this year. It’s not more volatile, it’s very dull, but small oscillations make it a difficult environment.”

The conversation around uncertainty is a conversation she has often, and as former treasurer of the United Nations, she’s well connected.

“I was speaking to Paul Volcker today,” she says. “The last time I spoke to him we were talking about Mexican bonds yielding levels under 6 per cent, in our conversation today I said we should have bought them!”

One of the continuing attributes of the defined-benefit United Nations Joint Staff Pension Fund (UNJSPF) is its realistic return target – set at a 3.5 per cent real rate of return. The fund has outperformed its policy objectives in one, seven and 10 year periods with the 10 year return to December 2013 of 7.2 per cent outperforming the policy benchmark of 6.8 per cent

“The people who manage the fund are beneficiaries too and most have worked in different parts of the UN. They have pride and really understand their responsibility,” she says.

 

Good people are at the core of any successful organisation, and that is true for asset owners. Global chief investment officer of Towers Watson, Craig Baker discusses how designing and implementing structures that attract the right people in the right roles can unlock long-term sustainable advantages that the right investment team can offer.

 

It is a truism that good people are at the core of a successful organisation and it is no truer than in the asset-owner world that is characterised by heavy competition for the talent needed to generate superior investment returns.

It is also an environment where complex global operating models are required to maximise those returns. So the challenge for asset owners now is to design and implement global structures that attract, retain and develop the best people possible.  Crucially, this means the right people for their organisations, allied to the right rewards, working in the right roles.

So who are the right people, what environment do they need in order to perform best, and to what extent can this be created through reward structures? What describes the critical roles?

Much has been written about the characteristics that define the best investors in the asset management industry and, while there are similarities in the asset-owner world, the context is different and so is the debate.

At the heart of the matter is the difference in the mission and goals between asset owners and asset managers and the different skills and roles required to fulfil these. A critical aspect is in risk management where the asset owner has to master deeper and longer-term risk factors. Another obvious example is the skills gap between direct investing and choosing external managers, although this is diminishing as asset owners do more direct and co-investment.

Many of the largest global asset owners are charged with safeguarding and growing public funds (whether pensions or national resources) and as such fall under a political or public scrutiny that private sector asset managers do not. This can make it hard to attract the most highly paid talent because of entrenched pay scales and the justification that would be required for such elevated compensation, relative to norms.

Alignment is also a challenge for asset owners.

While the agency problems are fewer than under the traditional structure of outsourcing to asset managers, the tools available to improve alignment are restricted.

For asset managers, measures such as co-investment, employee ownership and performance fees, if structured correctly, can lead to improved alignment.

These options are not generally available to asset owners, and instead they may have to rely solely on carefully calibrated incentive pay in which long-term incentive plans will play a big part.

However, asset owners are culturally well placed to implement these, and because they have strong alignment potential, they should also benefit the organisation. The employee wants a ‘pay for performance’ deal, the organisation, at least in theory, gets ‘performance from pay’.

Among the recruitment challenges is being located outside the traditional financial centres, but many asset owners today have overcome this by applying the popularly captioned “green, grey, and grounded” strategy that Bachher and Monk have described.

The green employees (early career stage) can have greater responsibility and development at large asset owners where they can develop as generalists, whilst only sacrificing a small pay discrepancy to the private sector.

The grey employees can step out of the more cut-throat private arena, give back, mentor the green, and avoid the stresses of competing for capital in the fundraising cycle that is critical to asset manager success.

The grounded employees are location orientated, whether that is a tie or a desire.

This approach to recruitment can build a good base of talent but should be fused with nuanced reward packages, which combine both financial and non-financial rewards and incentives.

In purely monetary terms, compensation needs to align pay with performance.

It should reward appropriate risk taking (not too much nor too little) and align performance with the strategic goals and time horizon of the fund.

A compensation package should have a balance between current and deferred pay. Given investment performance volatility, the deferred, long-term element should be central to the way asset owners remunerate their people. Crucially though, deferred compensation needs to find a balance between being fairly assessed, which gets easier as the assessment period increases, with incentives that motivate people each working day, which becomes harder over that longer time period.

There are many traps lurking including: complexity in design that frustrates and demotivates; asymmetric pay structures that could lead to inappropriate risk taking; too much rough justice in rewarding lucky outcomes not skilful outcomes. Perhaps the biggest trap is imitating the asset managers’ incentive designs that are often over-leveraged to luck and short-termism.

Having remuneration structures that attract and retain talent is one thing, but asset owners need to find the right talent for their organisation while facing the natural temptation to hire ‘star performers’ who have been successful elsewhere.

Groysberg, Nanda and Nohria argue that “in business, the only viable strategy is to recruit good people, develop them, and retain as many of the [resultant] stars as possible”.

To avoid assuming that what works in one organisation translates across to another, asset owners need recruitment practices that benchmark potential employees to a very specific set of desirable traits: skills and experience of course, but values and attitudes too.

These practices are likely to reflect the overall mission, align with the organisation’s cultural norms and fill gaps in expertise. Diversity has many valuable dimensions to asset owners in the extreme competition for returns. The edge mostly comes from focusing on long-term sustainable returns ahead of exploiting short-term market inefficiencies, as well as translating themes, ideas and asset trends into practical decisions and portfolios.

Another consideration for asset owners is to remain aware of developments that will shape the recruitment marketplace, arguably the most powerful of which is the emergence of the so-called ‘Millennials’ generation.

This presages a fundamental shift in the workforce.

According to research, by 2020 nearly 50 per cent of the workforce will be Millennials, rising to roughly 75 per cent by 2025.

Millennials are seen as knowledge workers, who seek employability and a career lattice (not ladder).  They seek motivation, meaning, and flexibility, and have a significant social consciousness.  They are technology natives working in a fast-moving world who thrive in a results-oriented work environment.

As this new group comes to dominate the workplace, the best employers will adapt so as to take advantage of what they offer, for example delivering more flexibility and responsibility in the employee value proposition.

There are examples of this in what Reid Hoffman, co-founder of LinkedIn, describes as ‘The Alliance’ which forges a mutually beneficial deal with explicit terms between the employee and their organisation.

We see some asset owners evolve the roles that their people play to contribute more fully to the generation of the best ideas. The ‘one portfolio approach’ adopted by a rising number of asset owners uses roles that have a line of sight across the whole investment spectrum. The employee often values the greater empowerment delivered in network styles of operating in preference to hierarchy – again evident in certain organisations.

The workforce in 10 years’ time offers many challenges to today’s thinking, but simultaneously it offers changes that asset owners are well placed to take advantage of.

Given the employment currencies of knowledge and transferable skills, there will be a far wider talent pool for asset owners to consider than the traditional competition with asset managers. Asset owners, particularly public funds, also give a direct opportunity for people to exercise their social consciousness.

Indeed, reward itself will also take on a more explicitly non-monetary element.

In ‘Drive: The Surprising Truth About What Motivates Us’, Dan Pink argues that, in a knowledge-based firm, motivation is best realised through giving workers autonomy, mastery and purpose.  These three levers therefore can be used by asset owners as reward elements to attract the right people.

Autonomy is often easier in an asset owner context than at a very large institutional asset manager. The evidence is seen in the considerable extramural activities that many leaders of asset owners pursue.

Mastery could be found through training, professional development, idea generation, challenge and debate; the full spectrum from generalist to specialist. Clearly here, mastery should also offer powerful fuel for fund performance.

Purpose could link closely to the social conscious of the new workforce which publicly sponsored funds can satisfy, especially those with agendas of direct development investing or with committed environmental, social and governance (ESG) policies. The most interesting opportunities for sustainable investing lie with the asset owners.

There is a war for talent and Groysberg, Nanda and Nohria conclude that: “the first step in winning the war…is not to hire stars but to grow them”.

The talent pool is changing and asset owners are well placed to take advantage of this.  However only those that best understand and capture future trends in the workforce, secure the talent that is right for them, and make it work in the right roles in line with their objectives, will realise the long-term sustainable advantages that the right investment team can offer.

Craig Baker is global chief investment Officer at Towers Watson

The Pension Protection Fund was set up nearly a decade ago to protect members of UK defined benefit pension where the sponsor became insolvent.More insurance provider than pension fund it’s risk tolerance is low and its investments conservative. But chief investment officer, Barry Kenneth, says the portfolio is evolving, including a new allocation to hybrids – assets that have both excess return and hedging properties.

The Pension Protection Fund’s main function is to provide compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover the Pension Protection Fund level of compensation.

It currently protects 6,000 schemes in the UK.

“Our risk tolerance is low risk compared to the industry and we have a global investment strategy so that we don’t correlate to the schemes we underwrite or the UK economy. It’s why we have a large allocation to alternatives and offshore assets.” Kenneth says. “The return driver comes out of the risk tolerance and we model probability of that. We want the probability of success greater than 80 per cent.”

“At the end of the day we’re a deferred annuity provider, given that we are a pensions provider of last resort to qualifying defined benefit schemes. We fall somewhere between a pension fund an insurance provider, and probably more the latter.”

The PPF has a conservative investment approach in line with a return objective of 1.8 per over liabilities with a strategic risk budget of 4 per cent. Importantly there has been a recent evolution of this risk budget, as the fund has added illiquidity as a separate risk factor.

“Given the PPF will pay compensation over a long timeframe, we concluded that there should be a tolerance to have more illiquid assets, although it was paramount we could demonstrate to the Board, that we could quantify that risk and also ensure we are compensated accordingly for tying up capital.”

“As we develop our asset allocation to include assets which have growth and hedging characteristics, many of these assets tend to be more illiquid (e.g. property leases) so being able to quantify all the risk factors from these types of assets is important. A portfolio of swaps, bonds and cash is applied to the portfolio as a swap overlay to mimic the expected liability cashflows.”

Outside UK government bonds, the bond portfolio also contains emerging market debt, investment grade credit, ABS and global sovereign bonds.

The fund is relatively new to alternatives, with this strand of the investment strategy being adopted in 2010, including private equity, infrastructure, real estate, GTA, farmland and timberland and alternative credit.

There will be a larger allocation to what would have been classed as alternative assets in the hybrid allocation as some alternatives such as debt infrastructure or property leases will form part of this portfolio and these assets have both return characteristics as well as stable long term cash flows which assists in hedging the liabilities.

Under the new target allocation the biggest shift will be from cash and bonds to the new hybrid allocation, which will be around 12 per cent, which will result in the deployment of £2.5 billion to £3 billion in this area.

“It is difficult to get these assets, and valuations are high so we figuring out what a realistic allocation might be. We think of them in terms of risk factors, not what the assets are called, it needs to fit both in both the growth and hedging criteria.”

The fund’s hedging portfolio is made up of 30 per cent gilts and 70 per cent over the counter derivatives and will now also include hybrids, which will have liability and asset qualities, marking the key evolution in the portfolio in recent times.

“You can have classification of assets but in the hybrid book the risk factors are more important than the name, so we will be looking for factors such as duration, inflation, credit, illiquidity. Whether that derived from UK corporate bonds, ground rents, leases, social housing is not the main driver it’s the factors,” Kenneth says. “When we think about liquidity/illiquidity in terms of modelling that factor, our driver is how long it takes to sell that asset as close to fair value. For example gilts or listed equities model as having no illiquidity premium as they can be sold on the same day, however if we hold a property lease that would take months if not years to realise fair value. In the context of the fund we need liquidity to pay collateral on derivative positions and to pay our member compensation. In terms of sizing our illiquid assets we are conscious that our liquidity needs are not compromised by allocating more capital to illiquids.”

The fund protects 11 million members in defined benefit schemes across the UK and has about £16 billion in assets.

Kenneth says there are a number of challenges facing the fund in the next couple of years including those associated with using over the counter derivatives. The cost of hedging will go up as central clearing becomes a requirement and bank’s ability to warehouse risk becomes more challenged, through new financial regulations.

“We also worry about the provision of balance sheet from banks on operations such as Repo, given the new bank leverage rules, which we use in our strategy. We therefore need to prepare ourselves for that in terms of buying more assets which give us long term cash flows and have less reliance on derivatives. Banks retreating in certain lines of business could also give us an opportunity to plug gaps where we think there is value i.e. direct lending. This is why we are creating the hybrid bucket.”

“We will have to evolve the way we interact and deal with banks and we are looking at how we can evolve our strategy without getting too hamstrung by additional costs.” “Given our size we can play in more areas, for example property leases and we can we be a material player. Our size is giving us flexibility and we need to use that to become more efficient.”

Kenneth, who has a team of 12, will be recruiting to evolve the team to deal with the growing complexity.

The PPF is also in the middle of a risk system procurement, in order to provide more portfolio information. It is also conducting an emerging markets debt tender. The fund has funded about 30 managers, with a current pool of about 60.

And while everything is managed externally now, one of the agenda items of the next three-year business plan is whether to internalise any investment functions. The fund was 109 per cent funded last year, achieved through investment returns and a levy on the industry of £695 million a year. To be protected by the PPF, a fund has to have a sponsoring corporate that is insolvent and the pension fund has to be underfunded.

“We get claims every year from funds that are underfunded. We charge each fund based on the risk of the scheme and the number of members. Our mission by 2030 is to be self-sufficient.”

A strong belief in active management, trust in the skills and capabilities of its team, and a low-cost commercial approach has resulted in the Swedish AP4 producing its best ever performance – 16.4 per cent after expenses in 2013. Amanda White spoke to chief executive, Mats Andersson.

It’s a neat story for the SEK260 billion ($39 billion) fourth Swedish buffer fund. It’s beaten the board’s real return requirement of 4.5 per cent annually by 1.4 per cent over 10 years. Its active management approach has outperformed the benchmark index and its management expense ratio remains extremely low at 11 basis points including commission.

Chief executive of AP4 Mats Andersson has been at the helm since 2006 and has gradually reorganised and restructured the fund to be based on the core values of being professional, respectful and transparent.

“If we can live these core values and we can trust our people there is a potential to delegate and by delegating then we can be more efficient,” Andersson says.

At the cornerstone of the fund’s approach is the fact it’s a long-term investor and can withstand volatility; it advocates transparency in every investment, and if there is a choice between simple and complex investments, then simplicity is prioritised; it emphasises low cost; and has a commercial approach.

In the past five years AP4 has been one of the best performing pension funds globally, and much of that is due to its focus on the allocation process.

It allocates capital based on three time horizons – long-term (40 years), medium-term (3–5 years), and short-term (6–12 months) – with increased emphasis on the medium-term horizon.

Andersson says to meet the long term return target of 4.5 per cent real, the asset allocation needs to have a higher allocation to risky assets, which the fund interprets as 65 per cent equities and 35 per cent fixed income.

“If we have a long-term approach and measure this return over 20 years we will capture the risk premium,” he says.

This has worked, with much of the recent return attributed to a high proportion of listed equities.

“We believe in the long term there is an equity risk premium. We strongly believe there are only two assets, government bonds and equities, and the rest is a blending,” he says.

At the tactical level – in Swedish equities, global equities and global macro – the fund has had 11, six-month periods of active results, realising 50 basis points per annum above the benchmark.

The third level of allocating assets is called strategic mandates, and looks beyond the three to five year horizon.

“We try to be a long term investor and the fund invests where you need a long-term approach. For example you can’t measure private equity in three years,” he says.

AP4 also has huge position in small caps, and invests in sustainability and engagement mandates such as in low carbon, all of which measure in greater than three year periods. More like 10 years, Andersson says, adding the fund has about $10 billion invested in these strategic mandates.

“If we can do this then over time we can add 75-100 basis points. Over the past three years we’ve exceeded our targets.”

Generally the fund will back listed equities, over private equity where it only has about 1 per cent invested.

“We believe in listed equities and active management, we’re not too keen on private equity and infrastructure,” Andersson says. “We have gone our own way and will continue to do so, but not as an objective in itself.”

“Many funds have been forced to reduce risk, we are strong believers in liquid assets and we can bare volatility. Risk comes from different sources. Funds managers looking for uncorrelated and low volatility investments is just a way to play a charade.

“Everyone was so scared after 2008/09 and 2011 and were forced to sell equities and liquid assets but we think that was done at the wrong time. We can withstand volatility, and think it’s not a good measure of risk.”

About 80 per cent of AP4’s assets are managed inhouse, and by law it has to have 10 per cent managed externally.

The investment teams are organised under equities, global macro (which includes fixed income and foreign exchange), allocation, real estate, SMEs, ESG and other strategic investments. The fund’s CIO, Magnus Eriksson, is also the deputy chief executive.

The fund has a large home bias, about a third of its equities exposure is in Swedish equities compared to the MSCI of around 1 per cent. Andersson says historically over the past 20 years Swedish equities have outperformed the rest of the world, which is attributed to a unique governance approach whereby asset owners sit on a nomination committee which decides who’s on the board.

“Owners are accountable for the companies in Sweden,” he says. “In the US management hijacks the companies. Governance in many other places is management driven, not owner driven.”

While there is currently a review by the Swedish government to merge the AP funds from seven into five, Andersson says it is not clear what the strategy will be.

He does say the AP funds have been top quartile performers at lowest quartile cost, and it would be a challenging process to close a fund and restructure the assets. But for now, it’s business as usual.

 

 

 

 

The $1.3 trillion Government Pension Investment Fund of Japan will use factor investing, or smart beta, as a third way of implementing equity mandates, alongside active and passive, following a six-month research project conducted by MSCI that investigated how to best implement the growing interest in factor exposures.

 

The research project conducted by MSCI sits in the context of changes to the GPIF’s asset allocation which includes increases to global and domestic equities and a move away from its huge domestic bias across the portfolio, but particularly in fixed income.

It was thought that allocating more assets to equities required a thorough look at the implementation opportunities particularly given any limitations due to the fund’s enormous size.

In April, the fund announced it had awarded 14 active and 10 passive mandates for its domestic equity funds, and introduced some performance based fees. At that time it also decided to implement a wide range of indices. Based on the research “Effective implementation of non-capitalisation weighted index/benchmark”, conducted by MSCI, the GPIF introduced a new category alongside passive and active, called “smart beta active investments – an investment approach to effectively capture mid to long term excess returns through indexing strategy”.

Chin Ping, head of index applied research at MSCI, says the research was a six-month project that looked at the possibility of implementation of factors and covered both equities and fixed income.

“Factor investing has become more popular globally and the question many investors are asking is how to implement them. For GPIF the same is true and in particular in the context of the size of the fund. Their motivation was whether they could take advantage of moving away from cap-weighted portfolio,” he says.

MSCI concluded that the GPIF should not treat factor investing as a replacement for passive, or as an active strategy, rather it should create a third independent allocation to sit between the two.

“We concluded that factor investing is not a substitute for cap-weighted but an active mandate” he says. “But due to governance factors, and the cyclical nature of the factors, you should treat it as a third bucket, independent from active and passive and judged on its own.

“There is no way it can substitute for the passive allocation especially for large investors, you can’t have a $1 trillion factor portfolio.

“And the problem with the active bucket is that factors bring superior performance, but it raises questions about the governance framework, how do you evaluate factors on an ongoing basis?”

MSCI constructed 18 indexes based on six factors– high dividend yield, size, value, quality, momentum, low volatility – across the three regions represented by MSCI Japan, MSCI Kokusai (World ex-Japan), and MSCI emerging markets indexes.

“Our findings showed that all simulated single equity factor indexes outperformed their cap-weighted benchmarks by 30-260 basis points from November 1995 to August 2013,” the report says.

For the GPIF it is only the early phase of implementing factor investing, and the funding to do so will come from the strategic decision to decrease bonds and increase equities.

At the end of December 2013 the GPIF’s asset allocation was 55.22 per cent in domestic bonds, 10.6 per cent in international bonds, 17.2 per cent in domestic equities, 15.1 per cent in international equities and 1.77 per cent in short term assets.

This represents a significant shift from a year earlier where the fund had an allocation of 60.14 per cent to domestic bonds, 9.8 per cent international bonds, 12.9 per cent to domestic equities, 12.9 per cent to international equities and 4.25 per cent to short-term assets.

In October 2012 the Board of Audit of Japan expressed its opinion that “GPIF should consider reviewing whether their tentative policy asset mix ensures safe, efficient and reliable investment on a regular basis during the medium-term plan”.

As a response to this, and through discussion with government and the GPIF’s investment committee, the tentative policy asset mix was changed.

Domestic bonds were reduced from 67 to 60 per cent, domestic stocks increased from 11 to 12 per cent, international bonds increased from 8 to 11 per cent, and international stocks increased from 9 to 12 per cent. Short term assets remained the same at 5 per cent.

In 2013 the fund returned 9.45 per cent.

 

The new domestic equities investment managers

 

Traditional active management:

Eastspring Investments

Invesco Asset Management

Seiryu Asset Management

Natixis Asset Management

Nikko Asset Management

FIL Investments

Russell Investments Japan

JP Morgan Asset Management

DIAM Co

 

Smart beta active management:

Goldman Sachs Asset Management

Nomura Funds Research and Technologies (Dimensional Fund Advisors)

Nomura Asset Management

 

Passive:

DIAM Co

Sumitomo Mutsui Trust Bank

Mitsubishi UFJ Trust and Banking Corporation

BlackRock Japan

Mizuho