World`s biggest pension fund boss stays course through Brexit rout

The boss of Japan`s $1.37 trillion public pension fund, the world`s biggest, says he will stay the course on a stocks-focused investment strategy despite financial chaos sparked by Brexit, believing prices will soon settle.

In an interview with AFP, Norihiro Takahashi said an earlier decision to move a big chunk of the conservative fund`s bond-heavy portfolio into shares would remain in effect, even as equities are hit by stomach-churning volatility that threatens the fund`s returns.

Britain`s shock vote last week to leave the European Union wiped more than $2 trillion off global equity markets.

But Takahashi said Monday the fallout from Brexit was likely to be limited, and a mere shadow of the pain caused by the bankruptcy of Lehman Brothers in 2008 which sparked the global financial crisis.

"I think that the chances of falling into panic like during the time of the Lehman shock is really low," said the 58-year-old, who has been at the helm of the massive Government Pension Investment Fund (GPIF) since April.

"At the time of the Lehman shock, financial institutions were going bankrupt... but, at least from what I see right now, market players themselves are not necessarily falling into a financial crisis.

"They are still able to operate in the market."

He added: "I may sound too optimistic but I think prices will soon settle."

The fund`s anaemic returns have become a hot topic in recent years. A growing number of retirees and a shrinking workforce are straining government finances as Tokyo struggles to boost the world`s number three economy.

In response, Japan`s pension fund managers are looking for ways to improve returns.

In late 2014 the fund announced it was raising the share of stocks in its huge portfolio to around 50 percent from about 24 percent previously, pumping billions of dollars into domestic and overseas share markets.

The fund -- which analysts say could report a loss later this summer -- held just over 46 percent of its portfolio in equities during the last quarter of 2015.

The GPIF, with a value of nearly 140 trillion yen at the end of last year ($1.37 trillion at current exchange rates), towers over its nearest competitor -- Norway`s $800 billion pension plan.

Unlike some more adventurous counterparts, for decades it kept the majority of its cash in super-safe but low-return Japanese government bonds.

Takahashi said he would wait to see how Britain moves ahead with its EU exit plans before deciding on his next play.

"I want to be investing if I can while watching things cautiously, rather than being conservative," he said.

"So, in that sense, I am watching the situation calmly and once (Britain) decides which direction it will go, then I`ll take the fund in a certain direction."