Pension funds are among the largest investors in the world and generally have a long-term investment focus. Last week, Takahiro Mitani, president of Japan’s Government Pension Investment Fund (GPIF), the world's largest public pension fund with $1.49 trillion of assets under management said it would begin investing in emerging market equities by March 2012. Additionally, Joe Dear, Chief Investment Officer of the $221.3 billion California Public Employees' Retirement System (CalPERS) said that meeting its targeted investment return of 7.75% this year would be difficult. In the short run, CalPERS plans to increase its exposure to hedge funds and other alternative investment strategies to compensate for stock market losses and poor Treasury bond returns. (Note: CalPERS has 70% of the funds needed to meet its pension obligations).
MY TAKE: While pension funds are not immune to investment mistakes, it is important to understand the strategic changes taking place among these significant institutional investors. With global markets increasingly integrated, it remains to be seen if economic decoupling by emerging markets occurs.