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.
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