Mercer seeks to boost delegated investment business with BFC

Mercer, an international actuarial consulting firm owned by US-headquartered insurance conglomerate Marsh & McLennan, has acquired Tokyo’s BFC Asset Management Co Ltd for an undisclosed sum, according to an announcement from the company.

The logic for the move is to help Mercer win customers for its nascent “delegated investment business” under which some functions normally carried out by pension funds’ chief investment officers are mandated to third parties.

BFC was founded in 2006 and has recently been having a tough time winning new business.

Figures from the Japan Pensions Industry Database show that at the most recent financial year end on 31 March 2017 the firm had 65 domestic corporate pensions mandates worth 78.2 billion yen. JPID numbers are based on those which member firms submit to the Japan Investment Advisors Association.

Three years earlier BFC had almost twice as much with 118 mandates covering 139,733bn yen of assets.

The problem may have been in selling sophisticated products to corporate pension executives who have little time to develop expertise since they are moved around rather frequently as they continue to be cogs in their employers’ job rotation machines.

Companies may need to adopt a more finely tuned approach to management of their pensions when the era of low interest rates comes to an end and that, arguably, makes them more likely to consider using “delegated investment business” services.

As part of its positioning to meet this expected demand, Mercer started Mercer Investment Solutions in May 2015. It has reportedly yet to win a mandate but has been short-listed for some.

If marketing has been the problem then BFC seems to have found the right partner in Mercer as its press release on the acquisition is positively pulsating with promise — even on generalities.

Unquestioning coverage can be found here and here.

© 2018 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

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StepStone wins GPIF global infrastructure funds mandate

The Government Pension Investment Fund has awarded a “global infrastructure core strategy” mandate to  StepStone Infrastructure & Real Assets. The arrangement will see the firm investing so far unknown amounts on GPIF’s behalf in both property funds and co-investments.

The Fund sought RFPs from firms capable of managing this multi-manager approach in April 2017.

Since then it has been clear that GPIF is keeping its property and infrastructure investment separate both at home and abroad. Last month it appointed Mitsubishi UFJ Trust to handle its domestic real estate investments (see archive 20 December 2017) but there is no word yet on who will get the first foreign property mandate.

The California-headquartered StepStone notes in its website that is currently handling more than US$130 billion in allocations of which more than US$34bn is in assets under management.

Sumitomo Mitsui Asset Management has been appointed ‘gatekeeper’ (ゲートキーパー) on the new mandate and although GPIF does not specify what tasks it includes in that role StepStone it has a reputation in the market place as being strong in customised reporting to clients and downstream servbice providers such as custodians.

© 2018 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

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Institutional investors look to funds as route to foreign property

Asterisk Realty and Placement Agency expects Japanese investors to acquire over US$20 billion of foreign property in 2018 “if there are investable and reasonable opportunities”, according to a recent statement.

The firm points to the difference in characteristics between Japanese overseas real estate investment in the 1970s and 1980s — when insurance companies were buying whole US buildings —  and today —  when the degree of diversification is required is making property funds and funds of funds more attractive.

“For overseas fund managers and real estate players looking approach the Japanese investor market at this time”, says Asterisk, “understanding this backstory and tailoring opportunities to fit the current needs of the investor appetite can greatly increase chances of success.”

© 2018 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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GPIF seeks provider of information on investment strategies

The Government Pension Investment Fund is inviting firms with “sufficient expertise and know-how … and have past experience [of] providing information on investment strategy to institutional investors in Japan or abroad [for] no less than 10 years” to submit proposals for providing it with such services.

The first step for intending applicants is to acquire from the Fund a copy of the “Request for Proposals and Specification” relating to the project which today’s notice suggests will run for two years.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2

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Top 20 corporate pension funds are from finance and pharma

Financial conglomerates, pharmaceuticals companies and a sprinkling of technology firms dominate the list of Japan’s top 20 corporate pension funds by assets under management, according to an annual poll Nenkin Joho, the fortnightly newsletter published by Rating & Investment Information, the actuarial consulting subsidiary of the Nikkei.

Replying to R&II’s questionnaire is purely voluntary and just under 300 retirement schemes responded out of the total potential universe of 13,500 fund-type and covenant-type defined-benefit schemes in existence at the end of the financial year on 31 March 2017. A smattering of Employee Pension Fund arrangements, which are being phased out as their affairs become satisfactorily resolved, also replied.

Just how omissions might have skewed the compilation may be guessed at by the absence of Hitachi Ltd. The company has not sent back a questionnaire since the year ending 31 March 2013 when it had assets of 812,924 million yen —  well ahead of currently first ranked Sumitomo Mitsui Banking’s 776,589mn yen.

On the basis of data submitted, the top funds by annual contributions income were Sumitomo Mitsui Trust Bank with 17,365mn yen, Nomura Research Institute with 15,122mn yen and Tokio Marine Nichido with 9,020mn yen. Construction concern Haseko came in fourth with 8,527mn yen in yearly contributions but is only 42nd by assets with 54,031mn yen. It enjoyed a return of 3.14% in the year under review but an adjusted average of 6.01% per annum over the past five years.

Tokio Marine Nichido, and insurance concern, third by assets, was one of the very few to end the term with a loss — being 6.77% down though 7.52% up on a five-year basis.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

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GPIF opts for funds of funds for move into domestic real estate

The Government Pension Investment Fund is making its first move into domestic property investment via funds of funds vehicles and has mandated Mitsubishi UFJ Trust & Banking to advise on  implementing the “core strategy” for this part of its portfolio, according to an announcement on the Fund’s web site and an article in the Nikkei.

Realty and placement agency Asterisk takes up the subject noting, somewhat optimistically, “We expect their next announcement for managers for overseas real estate will have more impact for the market and more Japanese investors to follow suit”.

GPIF issued an RFP for the mandate just awarded in April when its intention to invest 5% of its portfolio in “alternative assets” was already well known. Property is indeed an alternative in the context of its portfolio which has historically been in bonds and equities.

While any move by the giant Fund into a new investment sector gives the country’s corporate pension funds some confidence to follow suit, this is not always the case. While GPIF’s equities holdings have expanded mightily under a significant re-allocation policy introduced two years ago, so far as can be seen from the available numbers those of corporate pension funds have been shrinking.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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Japan third largest economy after India by 2030, USA still no.1

Another excellent report from the Japan Centre for Economic Research this time giving its mid-term forecasts for Asian Economies 2017-2030 and pointing up comparisons with Japan’s economic evolution.

A taste:

“The forecasts were compiled on the assumption that [countries’] ability to adapt to innovation, including digital technology, will have a significant influence on their economic trajectories.

“The high growth group will include the Philippines (6.4% in 2030), India (5.2%) and Vietnam (5.0%) over the next 10 years. China, which had nearly the same growth rate as India in 2016 — 6.7% — will slow down to 2.8% in 2030. Although China can count on high productivity growth, its capital stock adjustment is more advanced.

“Although China’s growth rate will decelerate toward 2030, its economic scale, which was about 60% of the U.S. in 2016, will approach 80% by 2030. But like Japan, which approached 70% of America’s scale in the mid-1990s, China will not be able to catch up with the U.S. — though it will get closer than Japan did at its peak.

“China will remain the second-largest economy, well ahead of Japan. In fact, it will be 4.4 times larger than Japan, widening the gap from 2.3 times in 2016. China can be expected to continue accounting for about half of Asia’s growth in the coming years.

“But India is set to take over China’s role as Asia’s main growth driver in the 2030s. India, whose economy was equivalent to about 50% of Japan in 2016, will surpass Japan in 2028 and be 1.2 times larger in 2030. Now the world’s seventh-largest economy, India is poised to move into third place.

“There are other looming shifts in economic power: Indonesia will catch up with South Korea around 2030. The Philippines will overtake Thailand in 2027 and also Taiwan in 2029. Malaysia will widen the gap with Singapore, and Vietnam will overtake Singapore in 2027. The center of gravity in Asia is shifting from the east to the south — India and ASEAN — both in terms of population and economic size.

“As for per capita income, Malaysia will become a high-income country in 2023, with nominal GDP per capita over $12,000. Two years later, China will also become a high-income country. But China will not catch up with Malaysia by 2030. Thailand is likely to fall short of high-income status.

“Indonesia will be an upper middle-income country in 2019, with GDP per capita of over $4,000. The Philippines will reach that level in 2022, with Vietnam following in 2028. The Philippines will overtake Indonesia in 2029. India will not yet reach the upper middle-income level despite its fast growth. Singapore will be the only Asian state to catch up with the U.S., widening the gap with Hong Kong and Japan. Hong Kong will pull further ahead of Japan, with South Korea gaining ground from behind”.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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GPIF said to be ¥10tr up in Q3, start peformance fees in 2018

The Government Pension Investment Fund will begin introducing performance fees for mandates awarded to active managers of both domestic and foreign stocks and bonds from the start of the next financial year on 1 April 2018, according to a story in the Nikkei.

The newspaper report also includes an unattributed statement that GPIF “earned a record quarterly return of more than 10 trillion yen in the October-December period, thanks to the global stock market rally” though its results for the quarter have not yet announced.

The Fund plans to create the new fee structure “after meeting with each of the 50-plus companies that manage actively managed funds for the pension giant. Such factors as their investment styles and targeted returns will be taken into account when setting the fees.

“Under the new system, funds that achieve their predetermined investment return target will receive a similar level of fees as they receive now. If the actual return exceeds the target, however, they will be paid progressively more in proportion to the results.

“Missing the target will lead to lower fees, but even then, the payment will be comparable to the fees paid to passively managed funds sitting on a similar amount of assets. Investment returns will be evaluated using a time frame of three to five years, rather than looking at short-term returns.

“Actively managed Japanese stock funds used for GPIF assets did not earn their keep over the past decade, with their investment returns undershooting index growth by 0.04 percentage point despite the funds being paid higher than passively managed funds. The GPIF hopes performance-linked fees will change this around.

‘”We want to motivate fund managers to improve their investment management capability,” President Norihiro Takahashi said.'”

It would be nice if the Fund were to recognise in 2018 that when it makes information selectively available to favoured media, even before the news appears  on its own web site, it does not help make markets more efficient and honest — a goal to which it has repeatedly says it aspires and is trying to make fund managers responsible for achieving.

It is particularly strange that GPIF should favour the Nikkei when it is the lead offender in leaking the financial reports of companies listed on the Japan Stock Exchange before they  are made know to the market.

This is the sort of practice the Fund should be working hard to stop.

A list of who managed what investments for GPIF at the close of the financial year on 31 March 2017 can bee seen under “The Giants” tab at the top of this page.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Steady Q2 for business and allocations at Tokyo fund managers

Tokyo’s asset management firms enjoyed a steady second quarter, figures from the Japan Investment Advisors Association show, with mandates in issue up 1.3% to 7,319 and assets under management rising 3.0% to 2,285,192 billion yen with a good part of that gain coming from rising stock markets at home and abroad.   Text continues below table

The numbers for domestic mandates cover mostly pensions business but that segment accounts for only around 6% of the business from abroad. Text continues below table

At the close of the quarter on 30 September each mandate in issue covered an average of 312.2bn yen in assets but the wide difference remains between those awarded by public pensions (including the Government Pensions Investment Fund which handles  the contributions of the populace to the national basic pension) and those from company-based schemes.

Each public mandate represented assets of 201.9bn yen at the end of the term compared with 6.2bn yen for each private mandate. However the fees on the former are wafer-thin.

Asset allocation also held steady with a slight rundown of amounts in ‘short-term’ investments except for those in Asia which rose mightily but from a very low base.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the        (text continues below table).

              

secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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First half profits up, assets down at Japan Post Insurance

Investment income at Japan Post Insurance in the first half of 2017/18 was 5.5% down year-on-year to 640.9 billion yen, reflecting a 2.11% drop in the value of its assets under management to 78,639.3bn yen, even as its net profits rose 22% to 51.2n yen on an increase in premiums for medical, cancer and long-term care cover.

Asset allocation remained much the same with the only noticeable shift a rise from 7.5% to 8.7% in the proportion of the portfolio accounted for by “foreign bonds etc … which includes foreign-currency-denominated bonds and investment trusts recorded under Japanese corporate bonds and other securities, respectively, on the balance sheet”.’At least half this climb happened in the first (April to June) quarter of the year.

 

 

 

 

 

 

 

 

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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