Japan’s Smaller Enterprise Mutual Aid fund expects asset growth

21 August 2014   Category: News, Asia, Global, Japan   By Maya Ando

Japan’s Smaller Enterprise Retirement Allowance Mutual Aid Office (Smaller Enterprise Mutual Aid), the co-operative mutual aid fund for employees of small-to-medium sized enterprises (SMEs), is expected to increase its asset size in the wake of the regulations which prohibit the establishment of new employee pension funds (EPFs).

The rules, which came into effect on April 1 this year, also encourage existing EPFs to dissolve and convert to other types of pension plans. There are currently 516 EPFs in Japan, of which 286 were scheduled to be dissolved by July 14, according to the Ministry of Health, Labour and Welfare. A number of these funds were held by SMEs.

The ministry has said that dissolved funds would have their reserves transferred to the Smaller Enterprise Mutual Aid, which provided an additional 1.82% retirement benefit to members in fiscal year 2014 after it secured alpha returns on its equity investments.

Smaller Enterprise Mutual Aid was established in 1959 and the fund size has grown to 4.27 trillion yen (US$41.6 billion), as of the end of May 2014, up 4.6% from a year prior.

It allocates 32.1% of its assets to domestic bonds and 2.3% to yen-denominated foreign credits. Its exposure to government-guaranteed bonds is 13.9% and life insurance assets 4.7%.

Its money trust accounts for 41.2% of assets, and is managed by 14 external asset managers, including AllianceBernstein, Goldman Sachs Asset Management, JP Morgan Asset Management, and DIAM, amongst others.

Within the money trust, 38.2% and 20.7% of assets have been invested in local bonds and equities, respectively, while foreign equities and bonds exposure is at 19.9% and 21.2%, respectively.