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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GPIF signs up Sony to study impact of AI on asset management

Sony Computer Science Laboratories will partner the Government Pension Investment Fund in studying how artificial intelligence can contribute to GPIF’s long-term asset management, according to an announcement on the Fund’s web site.

In addition the tie-up will look on an industry-wide basis at;

  • The impact of AI on asset managers’ business models and their consequent evaluation methodologies;
  • How AI technologies can be used to reinforce long-term investments decisions, including via dynamic factor analysis and scenario-based risk management;
  • The possible use of AI technologies to reconcile asset manager’s explanations of their investment decisions with the actual track of trading data.

The selection of Sony Computer Science Laboratories follows the issue of a request for proposals on the matter in July.

© 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’s vision may be clearer than conveyed in interview

Two articles in US publication Pensions & Investments, based on a 13 November interview with GPIF’s chief investment officer Hiromachi Mizuno, look at how GPIF hopes to use size as way to enhance beta and how it is helping overseas managers navigate Tokyo.

The first seems to indicate that the Fund has given up hope of managing equities inhouse and the team is focussing instead on promoting “more long-term decision-making by owners, asset managers and listed companies” so as to improve the overall investment climate, and on supporting “leading asset managers to set up shop in Tokyo” in order to bring about “systemic improvements that wouldn’t typically appear on an asset owner’s to-do list”.  Hmmm.

The interviewer seems not to have probed any of what was said by, for instance, asking how a reported drive to make English GPIF’s second working language is resulting in ever-lengthening delays between publication of an announcement in Japanese and its English translation.

There is also no acknowledgement of the very large number of foreign firms which have been doing fully authorised business in Japan for decades and of the leading role they played in developing the asset management industry from 1995 when it was first allowed to operate independently of trust banks and life insurers.

Potentially more interesting is that if greater use of English means no need for translators at meetings between the Fund and “foreign” potential service providers, then, it is claimed, there will be no need for the overseas entities to use Japanese “gatekeepers”.

The use of this terminology throws up numerous definitional problems.

First, as already noted, there are many “foreign” firms doing business in Tokyo where they are manned largely by Japanese nationals. While a firm from abroad can do business in the country without a licence, convention and courtesy require that it acquires one.

Second, the term “gatekeepers” implies a role far beyond that of “door openers”. Those  who play the latter role are typically either the Tokyo offices of foreign firms which also market the specialist skills available from their non-Japanese offices, or trust banks facilitating introductions in their role as pension fund sokanji (or administrators).

The former includes the revenue-earning services offered by the same sokanji in setting up and running separate trusts which, once a mandate is awarded, do the custody and other administrative arrangements needed to support the investment activities taking place under it.

If GPIF were to dispense with this trust role, or even push for a greater number of entities being allowed to undertake it, that would be a revolutionary move. To achieve it, though, Mr Mizuno would have to go up against the likes of Mitsubishi UFJ Trust & Banking and Sumitomo Mitsui Trust Bank protecting their profits. That is probably not a task even he would relish — especially when he can achieve his ends without it.

© 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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Companies setting up captive foundations to hold own shares

Excellent story on Bloomberg notes that companies are swerving round even the mild anti-cross-shareholding stipulation in the Stewardship Code — which states they should explain why they keep such arrangements — and continuing to ensure a compliant ownership base by setting up foundations to which they transfer shares they have recently bought back from the market using their excess cash.

Examples include DMG Mori Co, Daiken Medical Co, sportswear maker Goldwin Inc, Kobayashi Pharmaceutical Co, Toyota Motor Corp and KDDI Corp.

Institutional investors would prefer that spare cash be distributed to them. Among the reasons floated for this not happening has been the notion that companies may be nursing losses on their pension funds which they will need to top up before the consequent underfunding is exposed in annual accounts to the 30 March year-end.

Having a pension fund stuffed with its sponsors’ own shares is a practice frowned on by  the Ministry of Health, Labour and Welfare, the corporate retirement scheme regulator.

© 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 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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