Mitsui to market US real estate & infrastructure funds in Japan

Giant trading firm Mitsui & Co is to enter a “strategic partnership” with Los Angeles-based CIM Group LLC that will see it “strongly supporting [the] marketing of CIM’s funds to the Japanese market through Japan Alternative Investment Co, a wholly-owned Mitsui subsidiary, with an aim of raising several hundred billion yen of new capital from Japanese investors in the coming years”.  CIM focuses on real estate and infrastructure investment.

The arrangement will see Mitsui acquiring 20% of the US company and investing in several of its funds. Its total outlays are expected to be US$450-550 million. The full announcement is here.

© 2016 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

Posted in Articles | Leave a comment

Postal institutions send proceeds from maturing JGBs abroad

The just published third quarter results of Japan Post Bank show its holdings of Japanese government bonds to account for only 35.3% of its portfolio, down from 37.7% at the close of the second quarter on 30 September and from 40.1% at the start of the year.

Keeping to a track apparent for some time, all of the drop during the term appears attributable to bonds which a long-ago official fiat dictated be held to maturity becoming due. The proceeds from this paper were then sent abroad into bonds and investment trusts (Please see tables at foot for details) .

A similar pattern prevails at Japan Post Insurance whose quarterly report was published at the same time.

Yet despite the clarity of the trend, the Nikkei and other commentators persist in using stock brokers’ reports of both institutions’ supposed “shedding” of JGBs to talk up the stock market. (A recent example is here.)

In yen terms Post Bank’s portfolio stood at 207,839.1 billion yen at 31 December, up almost 2% from 203,824.5bn yen three months before and up 1.4% from 204,876.6bn yen at the start of the year.

Post Insurance’s investment assets were 81,545.1bn yen, up 1.31% from 80,492.2bn yen at 30 September and 1.55% from 80,300.6bn yen at the start of the year.

Post Bank’s “held-to-maturity securities” were 42,842.9bn yen, 9.28% down from 47,223.2bn yen three months earlier and 17.69%% below the 52,052.5bn yen at 31 March.

At Post Insurance “held-to-maturity bonds” were 47,540.6bn yen, 4.45% down on the 49.752.9bn yen,at the start of the year.

Much has been said about how the two institutions will diversify but that will take time and, while their investments teams now include a significant component from Goldman Sachs, the learning curve is quite steep for both.

Until very recently a great deal of their customer’s money was simply grabbed by the Ministry of Finance’s Trust Fund Bureau which paid a set rate of interest on it via so-called zaito bonds while “investing” the money in public works through the Fiscal Investment and Loan Program.

What was left in postal portfolios could then be used by government to prop up whatever market it deemed needed propping at the time or otherwise directed into JGBs.

The maturity profile of the institutions’ government bond holdings is not made public but they seem to receiving about 15,000bn yen a year in proceeds from expiring debt.

Work to allocate this amount will be enough to forge their skills for the future without embarking on redistributions of their whole portfolios.

It is worth noting that Post Bank’s JGB holdings excluding those held to maturity make up just 15% of its assets.

Beware: the tables below are taken directly from Japan Post materials. Post Bank puts December 2016 figures on the left and quarter earlier numbers on the right. Post Insurance does the reverse.

© 2016 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

 

 

Posted in Articles | Leave a comment

Softbank to buy private equity giant Fortress at huge premium

Japanese conglomerate Softbank is set to buy America’s Fortress Investment Group for US$3.3 billion – a $1 billion premium over the company’s stockmarket value.

The extent to which the deal will help domestic institutions invest in non-public assets held outside Japan can only be guessed at for the time being but interest in acquiring such holdings is high among pension funds.

Fortress manages around $70bn in private equity assets which, added to the around $170bn Softbank already has under management (including $100bn in a technology development fund), will make the acquirer the world’s second largest private equity investment firm behind Blackstone with $330bn.

Fortress has acknowledged strengths in real estate which the most recent Nomura Research Institute study of demand for asset management products showed (see below) were relatively under-supplied.

 

For the most perceptive coverage so far see the New York Times story here and CNBC here

© 2016 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, 1

Posted in Articles | Leave a comment

Cohabitation comes to pooled & segregated pensions ops

When Sumitomo Mitsui Trust Holdings issued its statement Regarding the Policy for Enhancement of the Conflict of Interest Management Structure relating to the Asset Management Operations … on 31 January the announcement ran to four pages of thoughtful prose and a single-sheet press release.

The next day the Nikkei walked straight passed the point with a story headlined Changes likely at top of Japanese asset management industry, reporting that SMT was: ‘considering a group reshuffle to separate its banking and asset management businesses … to create Japan’s largest asset management company’.

The banking group promptly said no decisions had been made but two days after that a Hong Kong-based newsletter, reporting the 31 January announcement, added yet more supposed and unsubstantiated motives noting:

‘Whilst the negative interest rate policy pursued by the Bank of Japan places pressure on the profitability of Japanese banking groups, it is possible for the groups to seek integration opportunities as a means of boosting the scaleability of their businesses in order to curb costs’.

Well, yes it is possible, but this is even further from what SMT was asking the public to understand as the context for any future moves which will do nothing to change its market share, do little, if anything, to reduce its costs and offers no ‘integration opportunities’.

Whatever is under consideration at SMT it comes after the move by Mizuho Financial Group and Dai-Ichi Life last October to dissolve their DIAM Co asset management venture and form a new entity taking in Shinko Asset Management and Mizuho Asset Management along with the asset management division of Mizuho Trust & Banking to form Asset Management One (see archive 2016-10-4 New asset manager debuts with little fanfare but loads of loot).

Also in October last year the Nomura Research Institute published a paper on Fiduciary best practices for Japanese asset management companies which drew on a review of, and visits t0, 17 foreign fund firms headquartered in the US, Europe and the UK.

This document is an interesting read even to those familiar with the industry’s wide variety of corporate ownership and governance structures – stand alone, life co subsidiary, bank affiliate, bank subsidiary with separate board, and the many more possible permutations — as it shows them starkly side by side.

It then makes recommendations for the stewardship structures that might be best adopted by Japanese firms to ensure they meet their fiduciary duty of putting clients’ interest first.

One standout point is the need to prevent staff in asset management roles from betraying information about their or their clients’ activities to personnel from their employers’ other –now typically vast — financial businesses.

In the Japanese context his means an end to the revered practice of job rotation which has roots going so deep that without it banks might have found it difficult in the mid-1990 to break into the segregated pensions business at all.

Before then the local pensions landscape had been much the same as that in the US before ERISA was enacted in 1975; a sponsor placed its business with a trust bank or life insurer (often in the same keiretsu) which provided administrative, custody and other services as well as managing the assets in pooled accounts. The investment returns were terrible.

So once pension funds could begin offering mandates for specific amounts to be managed in specific ways the trust banks and life cos had to start from scratch and to scramble together whatever inhouse talent they could muster into specialist subsidiaries to compete with the foreign firms who were flooding in and doing very nicely.

Neither the banks nor the life cos had mutual fund operations from which they could second staff since the investment licences necessary to running such businesses were issued only to securities companies that, once again echoing US regulation from a previous era, were prohibited from running banking operations.

The years of prolonged crisis into which both the life insurance and banking sectors fell from 1995 (see Japan’s consolidating banking system and Japan’s shrinking life insurance sector under ‘Reference points’ at right) forced them into repeated restructurings and brought some flexibility into these arrangements.

Many firms which are bank subsidiaries, including Sumitomo Mitsui Asset Management, today hold licences which enable them to manage money mandated to them by pension funds and run mutual funds. At the same time, banks such as Sumitomo Mitsui Trust can now manage segregated assets for pension funds in addition to those which are pooled.

Today SMTB is part of the Sumitomo Mitsui Financial Group which has a host of other financial undertakings from which best practice in stewardship and fiduciary management suggests it should be separated so that its clients’ interest are not compromised.

It was a reorganisation to do just that which SMT set out in its 31 January announcement. Assertions that the move is aimed it becoming Japan’s biggest asset management or seeking scalability are simply silly.

Sumitomo Mitsui Trust Holdings is already Japan’s largest asset manager and 23rd in the world according to Pension & Investments/Willis Towers Watson’s latest annual ranking.  Moreover the firm already heads the Japanese league tables of managers for both pooled and segregated assets (for details see under the ‘Rankings’ tab at the top of this page).

The supposed ‘integration opportunities’ and ‘scaleability’ to be wrung from preventing information about either type of client from seeping into the group’s other operations are fanciful.

© 2016 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

Posted in Articles | Leave a comment

Defined-benefit pensions retain lead over defined-contribution

Defined-benefit pension funds have lost none of their investment clout in the past 12 months despite attracting little attention beyond the highly specialised media as they have gone about their business of trying to secure comfortable retirements for ordinary men and women.

Figures derived from the latest edition of actuarial consultants Willis Towers Watson’s annual cornerstone study show that DB schemes remain concentrated in just five nations, the top three of which account for nearly 83% of the almost US$18 billion in total assets.

Overall the split between DB and defined-contribution schemes assets in the top seven nations is 54% DB 46% DC. in Japan it is 96% to 4%.

This year the report makes a very welcome effort to explain how exchange rates can impact nations’ relative standings in the table.

© 2016 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

Posted in Articles | Leave a comment

GPIF absent from second government leak on Abe-Trump talks

Yesterday’s Nikkei report that the Government Pension Investment Fund will invest trillions of yen in US infrastructure, as part of a plan which Prime Minister Abe will put US President Trump at their meeting on 10 February (see posting immediately below), has brought a pair of follow-ups.

The Yomiuri Shimbun reports it ‘has learned’ that a draft version of the Japan-US growth and employment initiative shows the Japanese side will focus on same five fields as previously stated, giving more details of each, but does not mention GPIF.

GPIF has issued a statement in Japanese and English versions noting that the Nikkei’s coverage was ‘not based on any information by GPIF’ and adds a comment by President Norihiro Takahashi saying:

‘The GPIF has been managing the reserve assets, including infrastructure investment assets, solely for the benefit of pension recipients from a long-term perspectives, and the principle remains unchanged. GPIF will maintain the principle independently from the government.’

Who could possibly have suggested otherwise? Nonetheless it is good to know.

Meanwhile the Financial Times coverage of the upcoming meeting between messrs Abe and Trump highlights the Trump belief that the Japanese currency is undervalued.  Since the yen is possibly the most overvalued on earth it seems clear that the driving force behind the meeting is political and not economic, though economic consequences will result.

© 2016 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,

 

 

Posted in Articles | Leave a comment

GPIF to invest ¥ trillions in US infrastructure says Nikkei

“Infrastructure investments in the U.S. by Japan’s Government Pension Investment Fund will feature heavily in the economic cooperation package to be discussed at next week’s summit in Washington between the two countries’ leaders”, according to a report in the Nikkei which cites no sources.

Prime Minister Shinzo Abe told the lower house of the Diet yesterday that: “I wish to discuss contributions toward improved productivity and competitiveness in the entire US industrial sector, or a large framework that includes aid for infrastructure development” without mentioning GPIF.

A “draft proposal will feature infrastructure investments in the US by Japan, joint robotics and artificial intelligence research by the two sides, and countermeasures against cyber attacks”, according to the Nikkei.

The paper further reported that: “GPIF will purchase debt issued by American corporations to finance infrastructure projects …and …Long-term financing for high-speed rail projects in Texas and California would be provided through such avenues as the Japan Bank for International Cooperation”.

The meeting is set for 10 February in Washington DC with PM Abe leading the Japanese side which is expecting newly appointed US Commerce Secretary Wilbur Ross to attend as well as Trade Representative Robert Lighthizer.

The goal according to the Nikkei is “to create hundreds of thousands of American jobs, in keeping with U.S. President Donald Trump’s agenda, and deepen ties between the two countries”. Optimising returns for Japan’s pensioners is not mentioned.

© 2016 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

Posted in Articles | Leave a comment

GPIF makes appointment to new post of head of real estate

The Government Pension Investment Fund has appointed Hideo Yamada to the post of head of real estate, according to Asterisk Realty and Placement Agency.

Mr Yamada is well known in Europe and the UK where he headed Mistui Fudosan’s operations from eight years before returning to Tokyo in April 2016. During his time in London he was involved with such large scale urban redevelopment projects as the redevelopment of the BBC Television Centre.

Asterisk’s lengthy posting in the appointment is here.

© 2016 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

 

Posted in Articles | Leave a comment

GPIF publishes report on its stewardship activity during 2016

The Government Pension Investment Fund had published a 28-page report on its stewardship activity during 2016 – but only in Japanese. It is the first item here.

 

Posted in Articles | Leave a comment

More support for critics of Panasonic’s price for PanaHome

In an interesting follow-up to its story last week (see below Panasonic’s low bid for PanaHome: Stewardship fan GPIF silent ) the Financial Times reports that Hong Kong-based activist asset management firm Oasis Capital has become PanaHome‘s largest shareholder with 4.83% against the Government Pension Investment Fund’s 3.5%.

“Investors now plan to lobby the proxy advisory group Institutional Shareholder Services” according to the FT which also notes that since the Stewardship Code was written two years  “even those involved in writing” it “have admitted that corporate Japan has yet to make the cultural shift necessary for companies to genuinely cater to shareholder interests”.  This heretical claim is unsourced but unlikely to be heard from the Code’s chief propagandist GPIF.

The best-known example of Oasis’ activism fits well with what GPIF has said it wants fund managers to do to promote better corporate governance. When the firm saw that Nintendo was becoming noncompetitive by sticking with games played on consoles and pushed the Kyoto-based company to devise products for phones. That took three years but in December Super Mario Run sprinted into view.

© 2016 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

 

Posted in Articles | Leave a comment