Following QE8, Japanese Teachers' Pension Fund Goes All-In: Focus on 'Return' Not 'Risk'

Tyler Durden's picture


"We have decided to focus on return... we need a certain level of return no matter how the market condition is" is how the general manager of Japan's Teachers' Mutual Aid pension fund justifies their plan to push JPY100bn (of their JPY600bn) into riskier assets from J-REITs to hedge funds. As Bloomberg notes, the firm is adopting a new strategy designed to counter a decline in the value of traditional equity and bond asset classes. Notably, following last week's Illinois pension-fund target return markdown, the Japanese fund targets only 3-5% thanks to QE8 and two decades of repression and stumble through. Even achieving these targets means throwing out the 'risk' side of the equation as they push into foreign bonds (cue next European sovereign bond rumor) and chase momentum in Tokyo real estate (TSEREIT up 19% YTD). Haven't we seen this picture before - and it didn't end well?

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Mon, 09/24/2012 - 10:16 | 2824135 kaiserhoff
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Damn the torpedoes;)

Mon, 09/24/2012 - 10:19 | 2824154 redpill
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They just split 4s, 5s, and 10s and doubled-down on all of them to boot.  Hopefully the hotel room was comped!


Mon, 09/24/2012 - 10:36 | 2824216 Precious
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Unlike Illinois, there ain't no School Superintendents in Osaka that make $450K a year and have $20 million pensions, --- guarantee you that.

Mon, 09/24/2012 - 17:42 | 2825905 larz
larz's picture

cmon now precious its about the kids

Mon, 09/24/2012 - 18:30 | 2826026 AldousHuxley
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there maybe, but $20million in Japan will get you a bedroom in the hallway and perhaps some dose of radiation.



Tue, 09/25/2012 - 15:58 | 2829269 Precious
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Aldous Huxley, $20 million could even get you out of the hallway, into the bedroom, and a dose of clap.

Mon, 09/24/2012 - 10:25 | 2824179 hapless
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Mon, 09/24/2012 - 10:55 | 2824269 Sudden Debt
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Mon, 09/24/2012 - 12:14 | 2824617 JPM Hater001
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Yes, their collapse will be made of high quality default while our collapse will be a unionized mess.

Mon, 09/24/2012 - 10:28 | 2824189 slaughterer
slaughterer's picture

Chasing TSEREIT right now is akin to driving the car off the cliff with Thelma and Louise.  THAT is one desperate move. 

Mon, 09/24/2012 - 10:31 | 2824201 lostintheflood
lostintheflood's picture

THAT is one desperate move.

not if you know you can't lose...

Mon, 09/24/2012 - 11:38 | 2824456 machineh
machineh's picture

'Sayonara, sensei-sama'

Goodbye, honorable teacher!

(Obviously they didn't take 'History of Speculation')

Mon, 09/24/2012 - 10:34 | 2824210 slaughterer
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OT: nice how the rails are being pumped today to get a little Dow Theory revival going. 

Mon, 09/24/2012 - 10:45 | 2824243 Gringo Viejo
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The only "return" they're gonna see is when it comes back to bite them in the ass.

Mon, 09/24/2012 - 10:49 | 2824250 slaughterer
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OT2: roomer flying around about WPRT ... 

Mon, 09/24/2012 - 10:54 | 2824253 oak
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In China, there are some people suggested lately, due to current tension between Sino-Japan, that China should sell US T-bond and buy Japanese govenment bond for economic war on Japan. I am wondering does it work.

Mon, 09/24/2012 - 11:33 | 2824436 stocktivity
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Isn't this the object of central bankers around the world....bring interest rates down so savers are forced to put their money into stocks? Stock markets go up...people see thier 401k go they spend. Very simple.

Mon, 09/24/2012 - 10:17 | 2824137 Popo
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What will the appropriate strategy be when the fund is 30% it's current size?

Mon, 09/24/2012 - 10:22 | 2824165 GolfHatesMe
GolfHatesMe's picture

Direxion 3x funds of course

Mon, 09/24/2012 - 10:16 | 2824138 pods
pods's picture

This will happen in the US on a much grander scale.  Pension funds will slowly bleed from the simple math of more receivers than payers and with interest rates pushed down returns are going to be far below required. Aren't most pensions based on YoY returns in the 7-10% range?

Yep, we're fucked too.


Mon, 09/24/2012 - 10:23 | 2824172 LULZBank
LULZBank's picture

Naah, cant happen here.

US smart investment bankers will devise a derivative that take the need for more payers away, along with the risk and gives happy returns.

As for low interest rates, there already are Interest rate Swap derivatives which can take care of it.

Benny will have their backs covered, all the while.

Mon, 09/24/2012 - 10:26 | 2824181 centerline
centerline's picture

One of the most obvious things the Fed has been doing is pumping risky investment classes that can in fact yield enough to serve as "life-support."  The same investments that otherwise should be toast.  The same investments that could be crashed in a heartbeat - and would crash without perpetual support.  

Mon, 09/24/2012 - 10:26 | 2824184 kaiserhoff
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Where's Bernie Madoff when we need him????   Oh, right.

Mon, 09/24/2012 - 10:30 | 2824151 spanish inquisition
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Dear  Japan's Teachers' Mutual Aid pension fund,

Have I got a deal for you. Send $ care of Spanish Inquisition at ZH.  

Edit: Suppose I should say this is a joke and should not constitute investment advise.

Edit2: HMM. It looks like half will be invested overseas.

Mon, 09/24/2012 - 10:19 | 2824152 LULZBank
LULZBank's picture

What they are advertising is, they need another ponzi scheme.

Mon, 09/24/2012 - 10:20 | 2824156 centerline
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This should be overriding theme.  The no longer does risk set return and investments made on risk appetite.  Rather, return is required or bust... and risk be damned.

Yeah, this is going to end well.

Mon, 09/24/2012 - 11:30 | 2824425 Eric L. Prentis
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Needing or wanting is not getting.

Mon, 09/24/2012 - 10:21 | 2824159 RSloane
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"...a decline in the value of traditional equity and bond asset classes."

Yes, TD, we've seen this before, no it didn't end well, and we are about to see it again.

Mon, 09/24/2012 - 10:23 | 2824168 Dr. Engali
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ZIRP is proving to do a fantastic job for Japan I look forward to another 20 years of this crap here.

Mon, 09/24/2012 - 10:23 | 2824171 LongSoupLine
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yet another Central Bank consequence...

Mon, 09/24/2012 - 10:24 | 2824175 dbomb12
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The real question is, why is that guy wearing a protective mask on the trading floor?

Mon, 09/24/2012 - 10:28 | 2824192 kaiserhoff
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Odors have consequences?

Mon, 09/24/2012 - 10:34 | 2824211 LongSoupLine
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because the entire "market" is toxic.

Mon, 09/24/2012 - 10:25 | 2824177 bania
bania's picture

jim grant's "return free risk" seems appropriate here.

Mon, 09/24/2012 - 11:43 | 2824484 earleflorida
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instead of iApple trees, they should be planting LT Walnut trees

Mon, 09/24/2012 - 10:30 | 2824198 Gamma735
Gamma735's picture

Too many people too few resources.  People>Resources=War.  It is the tried and true tested method to benefit the oligarchy.

Mon, 09/24/2012 - 10:32 | 2824202 unionbroker
unionbroker's picture

A little comic relief from Yahoo Financial

Globalization is slowly, inevitably, taking away the cost advantage of producing goods overseas. Wages overseas still lag those paid to workers in the U.S. but shipping costs, public relations headaches and a lack of manufacturing control all make it harder to justify expanding manufacturing at places such as Foxconn.

Arguing that producing domestically will drive up consumer costs misses the point. Prices are going higher regardless because wages are moving up worldwide. That's what happens when you globalize; working conditions and costs start to equalize. It costs more to pay employees a living wage and we're running out of countries where workers will assemble our widgets for 50 cents a day. That's a good thing.

Airbus, Honda (HMC), Boeing (BA) and Ford (F) are just a few companies building or expanding U.S. plants this year. The corporations are coming back to America again for the same reason they left: money.

The U.S. middle class is being reborn even as it's being being declared dead -- and despite our government's best efforts to stop it. Jobs will be created in America again. It's inevitable, and a very horrific incident like what happened at Foxconn speeds up the process.


Mon, 09/24/2012 - 10:45 | 2824241 LULZBank
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Sounds like RoboTrader's post.

Mon, 09/24/2012 - 11:18 | 2824302 Urban Redneck
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It would be great if the corrupt US politicians bribed me with countless millions fleeced from their Yafool reading serfs to relocate my business back to the US too.

Mon, 09/24/2012 - 10:33 | 2824205 insanelysane
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It would be cheaper to buy a Greek island or 2 and then force the retiring teachers to live on those islands.  A little less radiation too.

Mon, 09/24/2012 - 10:33 | 2824206 youngman
youngman's picture

Yes the chasing of I know there are NEW YORK boys who will think up some new things to sell these chasers that have the so called return.....but we know how it will all end....lots of fees made..commissions...profits by the NEW YORK boys....then it falls apart...and the people lose...

Mon, 09/24/2012 - 10:39 | 2824223 Rainman
Rainman's picture

Noda vows to battle ongoing Japanese deflation to acheive 1% inflation within a year. Given the record of 3 PMs in 3 years, he won't be around to see if he's right.

Mon, 09/24/2012 - 10:44 | 2824238 Al Huxley
Al Huxley's picture

'We have decided to focus on return'.  Oh, desperation, never a good strategy for investing.  But hey, maybe they can subscribe to one of those penny-stock newsletters, I understand from their ads that they have returns of up to 10000%.

Mon, 09/24/2012 - 10:45 | 2824244 caimen garou
caimen garou's picture

stupid is as stupid does,thats is all...

Mon, 09/24/2012 - 10:50 | 2824252 Jason T
Jason T's picture

OT:  replace the word "universe" with "feds balance sheet"

Mon, 09/24/2012 - 10:55 | 2824263 BigInJapan
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I've got the Japanese Teacher's Pension Fund on line 3.

Mon, 09/24/2012 - 12:41 | 2824723 Non Passaran
Non Passaran's picture

He's carrying something, I'm not sure if it's an RPG or Sony camera...

Mon, 09/24/2012 - 10:55 | 2824265 Ricky Bobby
Ricky Bobby's picture

The degenerate gambler thinks: "I don't have rent and groceries for the kids but this one big score will get it all back, I just know it. Plus the Vig is 2 points a week and I am a month behind"

Mon, 09/24/2012 - 11:09 | 2824335 Arnold Ziffel
Arnold Ziffel's picture

If that pension fund ahd bought silver in 2008 they would be up > 300%.

If they had diversified into Gold they would be ahead > 200%.


Oh well.

Mon, 09/24/2012 - 11:12 | 2824352 abgary1
abgary1's picture

Thank the FEd for mispriced risk. 

The beginnig of a debt deflation is not the time to take on risk.

If they thought the last tsunami bad, wait until their pensions are wiped out by this debt tsunami.

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