Red Flags in the East: Learning from AIJ

The difficulty Japanese pensions face is hard to overstate. As the world’s most rapidly aging economy continues to confront low economic growth and a paltry interest rate environment, the institutional community’s search for yield is inevitable and necessary. Unfortunately, the discovery of alleged fraud at investment firm AIJ Investment Advisors Co. – where  109.2 billion yen of a reported 145.8 billion yen was lost in an opaque options strategy that recorded remarkably steady positive returns through the global financial crisis – has not made life any easier. Small corporate pensions were the primary investors in the alternative advisor.