Financial Strategy: Pension Funds Research Assignment (Essay Sample)

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Financial Strategy: Pension Funds
Introduction
Investing pension funds is one area which has attracted heated debate. The composition or nature of these funds has seen investors or stakeholders question key factors like accountability, returns and risks involved. Before deciding on the best way to invest pension funds, it is necessary to take note of the fact that pension funds hold interest of many as they are contribution from members of public. Based on this analysis, fund managers manager identify an investment mode that will promote financial good through good and long return for members, effective reporting and involvement of all stakeholders. Indirect or direct investment mode pension funds must be invested with integrity and effective financial strategies. A number of countries such as Japan can a test to the fact that pension funds hold a big percentage of their economies which can be estimated to 10% or more. This is a clear indication that well managed pension funds can push a better part of an economy to success. Japan as a country has experienced one of the biggest losses when it comes long term funds loses in the name of pension funds. As a result the losses, Japan through GPIF (Government Pension Investment Fund) has moved in with effective laws to help stamp legal control. According to the government stamping legal control is necessary to ensure all the stakeholder go the integrity way. From this kind of introduction, it is wise to conclude that pension funds should go the indirect investment way.
Japan Commercial property Market
Japan is one of the markets with great attraction economically, this is drawn from the fact that the country enjoys high rate of manufacturing operations. Japan’s commercial market property is wide thus pointing out the reason behind the many concerns and regulations set by GPIF. Japan’s commercial property market is largely composed of real estate and vehicle investment. According to many investors in this country, real estate and vehicle investment stand to earn good long term returns. The recent patterns in Japan have been a big concern to investors in Japan. Companies and individual with interest in investing in commercial property through pension funds have raised key questions. Some of these questions are directed towards government while others will go to property managers.
The recent ups and down of commercial property market in Japan has seen property manager be on the sport light for a number reason ranging from poor reporting, lack of stakeholders’ involvement and low interest. The government of Japan has made numerous and frequent presentations in its efforts of trying to bring the public and other investors up to date with returns and losses incurred. The latest presented by the GPIF in Tokyo communicated an increased pension funds bill. The high pension funds bill in 2015 resulted from the biggest pension fund grim. This pension fund grim resulted to a big loss estimated around $64 or 5.6% of Japan’s global market. From a global market perspective, 5.6% loss is so big to hence the need to take control through stringent regulation. As stated before, the pension bill has grown so high that has seen a number of investors shy away from companies or investors shy away from joining Japan’s commercial property market. A number of surveys in Japan held for the last three years reveal reduced commercial property investment as people seek to avoid making losses.
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From the above chart analysis, Japan’s commercial property market is not stable; this market is on a downward trend a move that is forcing investors to shy away from the market. The downward trend of Japan’s commercial market property has also led to an increased volatility. Despite the downward trend, it is vital noting that GPIF is putting much effort to bring back stability to this important market. GPIF has been putting much effort and has gone ahead to change its portfolio to 50% with its main aim being boosting returns to helping the economy service rising pension bill. High pension bill is a blow that has seen big economies scramble. It is on this ground that Japan’s GPIF is working round the clock to service the high pension bill to a positive level and bring back the confidence of investors.
A survey conducted in 2015 revealed that the rising pension bill instilled fear into investors who have kept of this market. Before the pension grim that resulted into the massive loss, Japan boasted of large real property and vehicle investment. After the loss, pension funds seems have been diverted to other markets, property managers in these companies have faced massive pressure and seeking to avoid battles with stakeholders. Apart from the real estate, pension funds were invested on vehicles for direct earnings, this has changed massively as pension fund members cannot find answers to the recent low interest offered to them. According to the pension funds members mainly comprising of the public, investment on the funds has seen them witness delayed returns and dismal interest.
Pension funds are indirectly invested in commercial property as both members and companies try to keep off management and other responsibility element regarding interest and quick returns. From the composition of these funds, one will attest to the fact that the wide pool is difficult to manage if invested directly as individual interest and need for quick returns will destabilize the fund base. Indirect investment remains the best mode of investing pension funds as way of allowing regulation take control. In summary, Japan’s commercial market property is notable an indication that has seen involved companies called increased capital regulation policy. To attain this, a 2015 survey picked out management reporting, stakeholder involvement and change to institutional investors.
Many investors still feel that Japan commercial property is lucrative and good regulations should be put in place to bring back success. According to the investors, good management reporting, effective involvement of the stakeholders and change to institutional investment will increase commercial property investment. People feel that change to institutional investment will reduced individual risk and promote professional and high regulation. The sensitivity and role played by pension funds calls stringent regulation and effective company management.








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