Reuters Summit-GPIF may mull alternative investments in future

(For other news from the Reuters Japan Investment Summit, click here)

By Chikako Mogi

TOKYO, July 2 (Reuters) - Japan's public pension fund, the world's largest, said on Wednesday it may consider alternative investments in the future, but it must take into consideration risks, market size and other factors. "We may consider alternative investments based on whether our risk-return improves by expanding investments to various products, and not because we need such investments when we raise our performance target," Takahiro Kawase, president of the Government Pension Investment Fund, told the Reuters Japan Investment Summit.

"Our asset size is so big that we need to take into consideration how big a market size is, whether our investment is realistic, risk factors, and whether it will lead to a meaningful investment diversification," he said. The fund has around 150 trillion yen ($1.4 trillion) in total assets. It currently does not invest in alternative products.

At the end of the current fiscal 2008/09, next March, the fund is expected to manage its assets under a model portfolio, where 67 percent will be invested in domestic bonds, 11 percent in domestic stocks, 9 percent in foreign stocks and 8 percent in foreign bonds.

Kawase said the fund's allocation is already more or less in line with the model portfolio.

"Overall, discrepancies are not that big. I don't expect large shifts in allocation," barring high volatility in financial markets, he said.

($1=106.04 Yen) (Additional reporting by Michiko Iwasaki; editing by Sophie Hardach)