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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kaiserhoff's picture

Damn the torpedoes;)

redpill's picture

They just split 4s, 5s, and 10s and doubled-down on all of them to boot.  Hopefully the hotel room was comped!


Precious's picture

Unlike Illinois, there ain't no School Superintendents in Osaka that make $450K a year and have $20 million pensions, --- guarantee you that.

larz's picture

cmon now precious its about the kids

AldousHuxley's picture

there maybe, but $20million in Japan will get you a bedroom in the hallway and perhaps some dose of radiation.



Precious's picture

Aldous Huxley, $20 million could even get you out of the hallway, into the bedroom, and a dose of clap.

Sudden Debt's picture


JPM Hater001's picture

Yes, their collapse will be made of high quality default while our collapse will be a unionized mess.

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. 

lostintheflood's picture

THAT is one desperate move.

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

machineh's picture

'Sayonara, sensei-sama'

Goodbye, honorable teacher!

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

slaughterer's picture

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

Gringo Viejo's picture

The only "return" they're gonna see is when it comes back to bite them in the ass.

slaughterer's picture

OT2: roomer flying around about WPRT ... 

oak's picture

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.

stocktivity's picture

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.

Popo's picture

What will the appropriate strategy be when the fund is 30% it's current size?

GolfHatesMe's picture

Direxion 3x funds of course

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.


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.

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.  

kaiserhoff's picture

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

spanish inquisition's picture

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.

LULZBank's picture

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

centerline's picture

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.

Eric L. Prentis's picture

Needing or wanting is not getting.

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.

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.

LongSoupLine's picture

yet another Central Bank consequence...

dbomb12's picture

The real question is, why is that guy wearing a protective mask on the trading floor?

kaiserhoff's picture

Odors have consequences?

LongSoupLine's picture

because the entire "market" is toxic.

bania's picture

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

earleflorida's picture

instead of iApple trees, they should be planting LT Walnut trees

Gamma735's picture

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

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.


LULZBank's picture

Sounds like RoboTrader's post.

Urban Redneck's picture

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.

insanelysane's picture

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.

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...

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.

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%.

caimen garou's picture

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

Jason T's picture

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

BigInJapan's picture


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

Non Passaran's picture

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

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"

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.

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.