Japanese, Aussie pension funds look to India

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With waning interest in the US and Europe, pension funds in Japan and Australia are eyeing investments in India, say industry sources. Japanese funds like Japan Government Pension Investment and Pension fund Association, with an overexposure in China, would want to invest in growth-oriented sectors of the Indian economy.

A possibility, according to experts, is that these funds would register as FIIs in India, or take the asset management route to enter the country. The $935.5-billion Japan Government Pension Investment is the world’s largest pension fund. “In Japan, the interest rate on savings in nil,” says Seiji Ota, a partner with BMR Associates. “Therefore, there is no point in keeping money with banks there. So pension funds have become attractive,” he says. He is quick to add that Japanese pension funds are generally conservative, unlike the sovereign funds of the Middle East.

“If the Japanese pension funds do come in, then it demonstrates the conviction these funds have in the Indian growth story. Of course, they have been attracted to China, but maybe they have sensed that it’s a bubble that could burst,” Ota adds.

Agrees Rohit Kapur, head-corporate finance, KPMG India, “These funds could be looking at the Indian market as an alternative. The returns that these funds could get in Japan are quite small.”

Same is the case with superannuation funds from Australia, including Westscheme, Statewide Superannuation Trust, SAS Trustee and Public Officers Superannuation Fund.

In Australia, every employee puts 10% earnings into superannuation funds. A lot of that now gets captured by banks like Macquarie, which is a huge investor in infrastructure in various parts of the world.