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SINGAPORE : The head of Japan's sovereign wealth fund (SWF) initiative said 30 per cent of a proposed US$100 billion fund could be invested in emerging economies.
The proposed fund is also aimed at targeting long term investments, such as natural resources, energy, and food production.
Japan's pension fund is the largest in the world with assets worth an estimated at some US$1.5 trillion.
But it has been struggling to meet its investment targets and payouts to pensioners due to the global market downturn.
So Japan is now looking to put these funds to better use through a sovereign wealth fund targetting emerging markets.
"These markets are getting bigger and bigger, and their economic development stage are in a high growth area. Not only are we looking to put in money, but we are also looking to transfer our technology," said Kotaro Tamura, Senator and SWF Initiative Head, Japan.
Speaking at the Russia Singapore Business Forum, Tamura said the current plan is to create a US$100 billion sovereign wealth fund, drawn from Japan's pension fund.
The SWF will then invest 30 per cent of the new fund outside Japan, with the rest being spent domestically.
It will target sectors with reasonable long term risk to match the needs of Japan's pensioners.
"Definitions of risk are different from short term investment risk definitions. So we put more money into such areas such as natural resources, energy and food production," said Tamura.
The key to setting up a fund is to avoid mixing politics with investment objectives. That means leaning on the private sector, and avoiding bureaucrats.
This is similar to models Japan has studied in South Korea, China, the Middle East and Singapore.
"Ensuring that they are well governed and that they are able to focus on their investment task without political interference will be a major challenge all over the world," said Singapore's Finance Minister Tharman Shanmugaratnam.
Japan is aiming to have a provisional portfolio for the SWF within the next three years. - CNA /ls
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