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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 | Link to Comment kaiserhoff
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Damn the torpedoes;)

Mon, 09/24/2012 - 10:19 | Link to Comment 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 | Link to Comment 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 | Link to Comment larz
larz's picture

cmon now precious its about the kids

Mon, 09/24/2012 - 18:30 | Link to Comment 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 | Link to Comment 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 | Link to Comment hapless
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POWERBALL, BITCHEZ!

Mon, 09/24/2012 - 10:55 | Link to Comment Sudden Debt
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IF IT SAYS MADE IN JAPAN IT MUST BE GOOD!

Mon, 09/24/2012 - 12:14 | Link to Comment 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 | Link to Comment 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 | Link to Comment lostintheflood
lostintheflood's picture

THAT is one desperate move.

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

Mon, 09/24/2012 - 11:38 | Link to Comment machineh
machineh's picture

'Sayonara, sensei-sama'

Goodbye, honorable teacher!

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

Mon, 09/24/2012 - 10:34 | Link to Comment slaughterer
slaughterer's picture

OT: nice how the rails are being pumped today to get a little Dow Theory revival going. 

Mon, 09/24/2012 - 10:45 | Link to Comment 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 | Link to Comment slaughterer
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OT2: roomer flying around about WPRT ... 

Mon, 09/24/2012 - 10:54 | Link to Comment 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 | Link to Comment 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 up....so they spend. Very simple.

Mon, 09/24/2012 - 10:17 | Link to Comment 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 | Link to Comment GolfHatesMe
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Direxion 3x funds of course

Mon, 09/24/2012 - 10:16 | Link to Comment pods
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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.

pods

Mon, 09/24/2012 - 10:23 | Link to Comment 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 | Link to Comment 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 | Link to Comment kaiserhoff
kaiserhoff's picture

Where's Bernie Madoff when we need him????   Oh, right.

Mon, 09/24/2012 - 10:30 | Link to Comment 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 | Link to Comment LULZBank
LULZBank's picture

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

Mon, 09/24/2012 - 10:20 | Link to Comment 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 | Link to Comment Eric L. Prentis
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Needing or wanting is not getting.

Mon, 09/24/2012 - 10:21 | Link to Comment RSloane
RSloane's picture

"...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 | Link to Comment Dr. Engali
Dr. Engali's picture

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 | Link to Comment LongSoupLine
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yet another Central Bank consequence...

Mon, 09/24/2012 - 10:24 | Link to Comment 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 | Link to Comment kaiserhoff
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Odors have consequences?

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

Mon, 09/24/2012 - 10:25 | Link to Comment bania
bania's picture

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

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

Mon, 09/24/2012 - 10:30 | Link to Comment 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 | Link to Comment 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.

l

Mon, 09/24/2012 - 10:45 | Link to Comment LULZBank
LULZBank's picture

Sounds like RoboTrader's post.

Mon, 09/24/2012 - 11:18 | Link to Comment 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 | Link to Comment 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 | Link to Comment youngman
youngman's picture

Yes the chasing of returns....now 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 | Link to Comment 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.

http://online.wsj.com/article/SB10000872396390444358804578015651997380798.html

Mon, 09/24/2012 - 10:44 | Link to Comment 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 | Link to Comment caimen garou
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stupid is as stupid does,thats is all...

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

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

http://www.youtube.com/watch?v=5U1-OmAICpU

Mon, 09/24/2012 - 10:55 | Link to Comment BigInJapan
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Kyle,

I've got the Japanese Teacher's Pension Fund on line 3.

Mon, 09/24/2012 - 12:41 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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.

Mon, 09/24/2012 - 11:20 | Link to Comment pragmatic hobo
pragmatic hobo's picture

pension, the next crisis ...

Mon, 09/24/2012 - 11:22 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Gains from what?  Doesn't anyone ask this simple question?  If everyone in the market seeks higher gains without productivity increases a lot of people are going to walk away very disappointed.

 

Mon, 09/24/2012 - 11:24 | Link to Comment JamesBond
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My wife and daugher were walking home in Tokyo yesterday when some creep started following them....  they finally shook him off after walking around for 20 minutes.

Japan gets sicker by the day.

 

jb

Mon, 09/24/2012 - 11:42 | Link to Comment Sisyphus
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And you are James Bond?

Mon, 09/24/2012 - 12:13 | Link to Comment timbo_em
timbo_em's picture

So they invest in hedge funds that then driven by career risk largely buy some main index?

If those teachers' fund managers had balls they would short Japanese government bonds.

Mon, 09/24/2012 - 12:21 | Link to Comment Killer the Buzzard
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.

Mon, 09/24/2012 - 12:19 | Link to Comment Killer the Buzzard
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Do Japs fart a lot?  Why do they all walk around with face masks?

Mon, 09/24/2012 - 20:20 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Air pollution from China.

Mon, 09/24/2012 - 13:00 | Link to Comment DR
DR's picture

Waive of the future for all pension funds...front run it while you can!

Mon, 09/24/2012 - 13:14 | Link to Comment Lost Wages
Lost Wages's picture

They need more TIPS. LOL.

Mon, 09/24/2012 - 13:53 | Link to Comment Big Ben
Big Ben's picture

A Japanese investment manager who doesn't like JGB's? Impossible! I hear time and again that the Japanese will always buy JGB's no matter what they yield. This guy will probably be carted off to the funny farm for spouting such insanity.

Mon, 09/24/2012 - 17:41 | Link to Comment TheObsoleteMan
TheObsoleteMan's picture

Notice the Japanese trader in the JPG wearing a surgical mask? Radioactive isotopes must be EVERYWHERE over there. Watch for a epic spike in cancer rates over there in the not so distant future. Economic systems come and go, but atomic contamination goes on and on.......

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