GPIF looks at how asset managers link bonuses to performance

The Government Pension Investment Fund is scrutinising  bonuses paid to employees by fund management firms in an effort to “understand the link between current remuneration structures and performance”, according to a Financial Times story quoting GPIF chief investment officer Hiro Mizuno speaking in London.

In recent times the Fund has put some welcome effort into communicating its actions and policies to the Japanese public, whose money it manages, by appointing public relations staff, broadcasting the press conferences for its quarterly results on Youtube and creating its own Twitter feed.

However, the recent announcement is the second made in London (see archive 2017-6-8 GPIF’s Mizuno “not satisfied” with asset managers’ governance) and not made available on the Fund’s web site or through any of its other channels.

© 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’s Q3 results reflect excellent performance so far this year

The Government Pension Investment Fund’s assets stood at 162,672.3 billion yen at the end of the financial third quarter on 31 December 2017, compared with 156,817.7bn yen three months earlier, as markets boosted the value of its domestic and foreign stocks portfolios and it appeared to shift out of short-term funds.

The modified total return for the quarter was 3.94%, giving a time-weighted return for the first nine months of the financial year of an excellent 10.70%.

Asset allocation was little changed and the shift out of short-term placements seems to indicate that GPIF is confident to maintain it going forward.Text continues after charts

Barring a major upset the fund is on track to surpass the return of 12.27% which it achieved in the year ending 31 March 2015 — by far the best since it was converted from the old Nenpuku in 2002.

Elsewhere the Fund’s chief investment officer Hiro Mizuno was telling a London Stock Exchange Conference that it wants to see more gender diversity on company boards according to a story in the Financial Times .

© 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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Postal giants to set up private equity firm next month

Japan Post Bank and Japan Post insurance are to set up a private equity firm on 9 February according to statement from the two.

The new firm, Japan Post Investment Corporation, will have capital and reserves of 1.5 billion yen and:

“… form new funds [vehicles] and supply risk money through those funds primarily to finance buyout deals in Japan [for the purposes of] business realignment, succession, rehabilitation etc. This is in order to help nurture industries in Japan.

“In parallel, the New Company will support the growth of business enterprises by encouraging investment in technologies that could become Japan’s core industries and in start-up companies that are in a phase of full-scale business expansion.”

Japan Post Bank will own 66.7% of the preferred shares which make up 1.45bn yen of the firm’s capital base and Japan Post Insurance the rest. Voting rights will be held 50% by Post Bank, 25% by Post Insurance and 25% by the “offices and employees” of the new company.

A tool for implementing government policies?

The statement says nothing on from where the talent to staff the new entity will come but the firm will already have access to some in-house expertise via Katsunori Sago, a former Goldman Sachs executive who in May 2015 was appointed to head asset management at Post Bank as it planned the reallocation of its portfolio.

Also missing, remarkably, is any mention of how the venture will contribute to the two firms’ earnings — despite the idea of “working to implement sophisticated asset management for revenue growth” appearing twice in an explanation of the firm’s purpose.

The absence of such a forecast raises suspicions that the firm is being established as a vehicle for furthering the corporate governance ideas of the Post companies’ main shareholder, the Japanese government.

Who will head the Investment Corporation is not yet known but “an individual nominated by Japan Post Bank is scheduled to be appointed as the President and Representative Director.”

For more on the investment portfolios of Post Bank and Post Insurance see the last entries on the page accessed via ‘The Giants’ tab above.

© 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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Under A.M.Best’s microscope Nippon Life shows its strengths

Insurance company ratings concern A.M.Best has affirmed Nippon Life’s financial strength and ‘long-term issuer’ credit ratings at A+ (superior) and aa- respectively.

In the firm’s view, the balance sheet of Japan’s largest privately owned life co is supported by a risk-adjusted capitalization that is “the strongest possible” and a “conservative investment portfolio”.

Beyond noting that the company keeps a modest gap between asset and liability durations, A.M.Best’s press release does not comment on the details of Nippon Life’s holdings but there is no reason to suppose that these are substantially different from those of other members of the Life Assurance Association of Japan net of Japan Post’s portfolio (q.v. archive 13 September 1017 Life cos’ allocations steady, Post supposedly set for change).

© 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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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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