Sovereign weal

The Economist this week (or was it last, catching up on back reading coming back from vacation) has an article about the atrocious returns the Japanese general pension fund is getting on its $1.4 trillion dollars in assets (compare $1.9 trln for Barclay's, $12 trln for Fannie and Freddy together). There are movements afoot to carve off a piece of it and establish a sovereign wealth fund to diversify away from moribund Japanese treasuries, and there is resistance.

At first I think, for sure they should diversify and let better investment minds generate better returns, and then I recall: what better minds? Wall Street fucked up big time, the world around.
This best and brightest model really hasn't been panning out for some time, so where should people and institutions be putting their money? It's a tough one.