Japan’s PFJC corporate pension fund braces for downturn

Rising interest rates and a depreciated yen are leading to investment-strategy revamps while a global economic slowdown would hold great opportunities, CIO says.
Japan’s PFJC corporate pension fund braces for downturn

Rising interest rates in developed markets and a yen losing value are pushing the Pension Fund of Japanese Corporations (PFJC) – which manages several corporate pension plans – to tweak its investment strategy.

Yoshisuke (Yoshi) Kiguchi,

In particular, should rising rates put the brakes on the global economy, interesting investment prospects could emerge, according to Yoshisuke (Yoshi) Kiguchi, chief investment officer for PFJC.

Kiguchi works with an unusual portfolio construction with around 90% allocated to alternatives. In the current rate environment, he sees potential in high-yield credit, long-term US fixed income, especially municipal bonds.

“We are restarting our long-term fixed income strategy, with emphasis on AAA- or AA-rated bonds,” Kiguchi told AsianInvestor.

Meanwhile, because of the Bank of Japan’s contrarian approach relative to other developed countries’ monetary policies, the Japanese yen has declined ever since interest hikes overseas started in 2022.

As the PFJC portfolio is around 90% allocated to overseas investments, Kiguchi emphasised tight currency hedging to avoid fluctuation risk, albeit with higher hedging costs. He would rather pay the extra charge.

“Hedging is difficult to predict and not a return tool because it is too volatile,” Kiguchi said.

PFJC manages capital from a combination of corporate pension funds, as well as endowment funds and one financial institution. The total assets under management was ¥130 billion ($1 billion) as of March 2023.


If markets should go through major shocks due to a recessionary environment, the CIO is prepared to increase the risk allocation and to put more money into markets, while taking home returns from the alternative investments fund vehicles that PFJC is primarily invested in.

“Dramatic times are good to invest in,” Kiguchi said.

So far, he has been bracing for new markets conditions by investing in relatively liquid alternatives like hedge funds, together with municipal bonds and fixed income.

Should stronger economic headwinds emerge, PFJC has the cash ready to take positions in attractive markets. In such a scenario, Kiguchi plans to focus on secondaries within private equity, distressed strategies globally within private debt, and adopt a focus on passive equities investments via indexes to gain good entry points if markets go down.

“We don’t need to beat the market every year, just long-term,” Kiguchi said in explaining his mindset.


Among the mandates of PFJC, Kiguchi has managed two since 2009: the Okayama Metal & Machinery Pension Fund and the West Japan Metal & Machinery Pension Fund.

Since taking the reins for these funds in January 2009, the funds have made an average annualised return of 7.48%. In the fiscal year ending March 31, 2023 (FY2022), the annual return was 1.14%.

In a volatile 2022 and facing uncertainty about how to price private market assets, Kiguchi said that it helped to have 90% of assets in overseas markets. The depreciating yen against especially the US dollar meant a higher local value of return from cashflow-generating alternative investments overseas.

Full-year 2022 was also a time where the waning Covid-19 pandemic restrictions gradually brought travelling activity back to normal levels.

This trend has also been an important one for Kiguchi as he sees in-person meetings with asset managers as crucial when investing in alternative investment fund vehicles. As these meetings could not happen during the pandemic, the CIO decided to primarily stick with already familiar managers by re-upping commitments to their funds where appropriate.

“Video calls were OK for communication, but it can’t replace in-person meetings. Online meetings mostly work for existing relations, so the pandemic was a hard period in that regard,” Kiguchi said.

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