Japan's GPIF To Use FX Forwards & International Bond Futures Around Rebalancing

The Asia-London crossover saw the head of Japan’s GPIF note that the fund plans to start using international bond futures and FX forward contracts to hedge risks surrounding portfolio rebalancing after the start of the new financial year (which begins in April).

• The pension fund has ~Y200tn of assets under management (~Y1.35tn).
• The fund highlighted the need for agile rebalancing given the sheer size of its AUM and its potential impact on markets.
• The fund doesn’t see the need to review its model portfolio, which targets a 25% weighting for all of the following: domestic bonds, domestic equities, international bonds and international equities (with variation tolerances).
• The GPIF highlighted its desire to expand its active stock investments (within the existing equity target weight) by a “considerable amount.”
• The fund already uses equity futures to hedge risks surrounding its portfolio rebalancing needs.