GPIF to use artificial intelligence in managing assets from 2018

“The Government Pension Investment Fund is considering using artificial intelligence technology to manage its assets” according to a Jiji Press report in the Japan Times which relies solely on what unnamed “sources have said”.

The article notes that “In the United States, firms including BlackRock Inc and Goldman Sachs are already using AI in asset management”. However both of these are intermediaries, not asset owners, and the report does not make clear whether GPIF will be applying AI to portfolios managed inhouse or favouring outside asset manages which use it.

“The organization aims to introduce the technology on a trial basis as early as fiscal 2018, which starts in April next year, the sources said.”

© 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 adding more firms to its transition managers roster

The Government Pension Investment fund is seeking an additional transition manager for the 21.98 trillion yen overseas bond portion of its 156.81tr yen portfolio according to an announcement — so far in Japanese only — on its web site.

The appointee will join BlackRock Japan which was appointed to similar duties in April 2015 (See archive 2015-4-3).

For further information contact admin-6i@gpif.go.jp.

Separately, GPIF announced it had hired Russell Investments Implementation Services LLC, via Russell Investments Japan, as a transition manager for domestic equities and for foreign equities BlackRock Asset Management North Asia, via BlackRock Japan.

The former joins Nomura Asset Management and BlackRock Japan Co Ltd (again with BlackRock Asset Management North Asia as “subcontractor”), also in place since April 2015, while the latter will be alongside Russell Investment Japan (with Russell Implementation Services Inc as subcontractor) appointed at the same date.

© 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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Richest EPFs proving the most difficult to rehabilitate

The 2012 collapse of AIJ Investment Advisors rang the death knell for EPF-type (Kigyō Nenkin) retirement schemes (see archive 2012-10-24 AIJ collapse brings an end to Employee Pension Funds).

These plans were already being replaced with fund- and covenant-type defined-benefit structures by companies who no longer wanted to support the government element of EPFs or had Tax-Qualified Plans (TQPs) which were being officially phased out.

The only EPFs to linger on are multi-company, single-prefecture, single-sector affairs for which Ministry of Health, Labour and Welfare must try resolve the remaining solvency and administrative issues.

It is becoming clear that while these issues may be large the assets involved are huge.

Figures published recently by the Life Assurance Association show that of 13,540 DB funds  in existence at 31 March 2017, trust banks were acting as sokanji (roughly ‘organiser’ but in practice more than that) for 3,808 while 9,379 were in the hands of life cos.

The numbers also show that the DBs administered by trust banks had 43,931 billion yen in assets while those with life cos had a much more modest 15,062bn yen since most of their sponsors are small firms. (Zenkyoren handles the investments of agricultural co-operatives.)

That gives an average worth per DB pension fund of 1.61bn yen each for those with insurance companies and 11.54bn yen each of those looked after by trust banks.

Yet the 110 remaining EPFs have average assets of almost ten times that at 173.38bn yen each.

Will this amount survive the unwinding process? Perhaps a better question would be ‘by how much will this reduce during the unwinding process?’

© 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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Government Pension Investment Fund up 6.64% so far this year

Fund management firms hired by the Government Pension Investment Fund  brought home the bacon again in the July-September quarter — keeping putting all components of the world’s largest institutional investor’s portfolio ahead of their benchmarks for the first half of the 2017/18 financial year.

At the same time the Fund has begun inviting proposals for ESG indices to be applied to passive investment in foreign equities which it proposes to begin next year.

On 30 September GPIF had assets of 156.81 trillion yen on investment income for the quarter just closed 4.45tr, a rate of return of 2.97%.

Asset allocation remained almost the same as at the end of the previous financial year with a continuing shift out of bonds which is usually done by investing the proceeds from maturing Fiscal Investment and Loan Program (FILP) paper elsewhere in the portfolio.

 

 

 

 

* In Japanese only. The contact for information is chosa@gpif.go.jp A Nikkei story on the invitation is here.

© 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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Japanese life cos still looking to foreign bonds for returns

Most Japanese life insurers plan to increase investments in foreign bonds in the year to March 2018 as Japanese government bonds yields are still too low for them, a roundup by Reuters of the firms’ recently announced investment intentions shows.

For coverage in greater depth of each companies’ intentions, including comments on reductions in forex hedging, click the individual links below:

Asahi Mutual Life, Daido Life, Dai-Ichi Life, Fukoku Life, Japan Post Insurance, Meiji Yasuda, Mitsui Life, Nippon Life, Sumitomo Life and Taiyo Life.

For results of previous Reuters survey covering life soc’ investment intentions for April-October 2017 see archive 2017-5-1 Life cos’ shape up in foreign debt, infrastructure markets investment

For how actual allocations stood at 2017-6-30 see archive 2017-9-13 Life cos’ allocations steady, Post supposedly set for change. Actual numbers at end-September coming soon.

© 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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Investors still shut out of Japan’s biggest infrastructure class

Veolia Japan, a subsidiary of the Euronext-listed French firm Veolia Vie, has won a  20-year contract from the Shizuoka Prefecture city of Hamamatsu to manage part of its wastewater and sewage systems.

This is the first long-term concession granted in the sector as well as its first public-private-partnership – an arrangement now being promoted by the national government to improve country’s facilities.

It is also a “user-pay” project where “water will pay for water” with the cost of the sewerage service covered by income from sales of drinking water.

The utilities providing these services are all still municipally owned so there is as yet no way for institutional investors to participate in improving what is Japan’s biggest infrastructure asset class.

However, the introduction of external management could theoretically enable future privatisations and help relieve an overburdened public purse of some of its load.

© 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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SMTB becomes top KKR manager, displacing in-house team

The in-house management team at the Federation of National Public Service Personnel Mutual Aid Associations (KKR) is no longer the MAA’s top fund manager. A drop in domestic bond holdings, all of which are managed internally, means that Sumitomo Mitsui Trust Bank — with its mandates to actively and passively manage domestic stocks, actively and passively manage foreign bonds and passively manage foreign stocks — now leads the field. For the details see under the KKR section of ‘The Giants’ tab atop 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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FILP bonds may weigh heavily on KKR portfolio for many years

The just-published first quarter report of the Federation of National Public Service Personnel Mutual Aid Association, usually known by its Japanese acronym KKR, shows it to be making very slow progress in re-balancing its portfolio away from bonds — and FILP bonds at that.

As previously reported (see archive 18 May 2017 Heavy lifting on re-allocation looms for public service pension), the retirement fund has undertaken to its regulator, now the Ministry of Health, Labour & Welfare, that it will move its asset allocation into line with that of the Government Pension Investment Fund (GPIF).

Achieving this within a decade looks impossible unless the Ministry of Finance forgoes its power to have civil service retirement schemes make duty investments in, and then hold to maturity, obligations issued by the Fiscal Investment & Loan Program.  Known as zaito bonds these pay for so-called ‘second budget’ projects.

It took GPIF 11 years to run down its FILP holdings from a peak of 30,653.8 billion yen in March 2006 to 1,647.2bn yen in March 2017. As the Fund could not sell its zaito bonds it had to wait until paper matured and then invest the proceeds elsewhere. KKR seems to be taking the same route.

However, GPIF’s FILP investments never accounted for 40%+ of its total portfolio as they do at KKR.                                                                           Text continues below tables

At 31 March 2017 KKR’s duty holdings were 29.15bn yen or 43.25% of the total. Three months later they were 28,576bn yen or 42.62% — down only 0.63%.

Such huge illiquid investments distort the rest of the portfolio with other fixed income investments accounting for only 8%. This looks too low to meet benefits payments coming due this year and may, or may not, indicate that a large portion of FILP holdings will mature before 31 March 2018.

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Sorry it is taking so long to post under ‘The Giants’ tab an English-language version of the table showing who was managing what for KKR at the 31 March 2017 year-end. It will be there soon. Meanwhile the Japanese-language version is here and includes lots of other interesting stuff including managers’ performance.

© 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 to help develop yardsticks for measuring…not a lot so far

In a press release issued yesterday, in Japanese only, the Government Pension Investment Fund announced that it and the World Bank will research what new yardsticks — ratings, benchmarks, guidelines and so on — are needed to help investors pursue ESG strategies via bonds.

This is presumably investors in foreign bonds since the Japanese fixed income market consists almost entirely of government debt and the number of corporate issuers is minuscule.

Neither of the institutions involved has yet mentioned the budget allocated for the work.

© 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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Insurers active in both buying and selling foreign firms

MS&AD Insurance Holdings is to invest up to £800m ($1bn) in ReAssure Jersey One Limited, a UK unit of Swiss Re, in a two-stage deal which will see it first acquiring 5% of the target’s outstanding shares for £175mn by 31 March next year, and then subscribing over three years for new shares to bring its total holding up to 15%.

The Japanese company is the country’s largest wholly private sector insurer and has both life and nonlife units. The deal has been characterised by the Nikkei newspaper as representing “MS&AD’s first big investment in Europe, and the company looks to use it as a steppingstone for business expansion there and to diversify its revenue sources, which center on Japan and the rest of Asia”.

Just a month before, Sompo Holdings, one of Japan’s Big Three property and casualty insurers, agreed to sell Sompo Canopius, which it acquired in 2013 for US$970mn million, to a private equity consortium led by Centerbridge Partners for US$952mn.

As they seek to escape the constraints of a shrinking population, insurance  companies have been very active in seeking overseas opportunities and Sompo gave its reason for disposing of Canopius as a lack of fit with Endurance Specialty Holding of the US which it acquired earlier this 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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