GPIF said to be ¥10tr up in Q3, start peformance fees in 2018

The Government Pension Investment Fund will begin introducing performance fees for mandates awarded to active managers of both domestic and foreign stocks and bonds from the start of the next financial year on 1 April 2018, according to a story in the Nikkei.

The newspaper report also includes an unattributed statement that GPIF “earned a record quarterly return of more than 10 trillion yen in the October-December period, thanks to the global stock market rally” though its results for the quarter have not yet announced.

The Fund plans to create the new fee structure “after meeting with each of the 50-plus companies that manage actively managed funds for the pension giant. Such factors as their investment styles and targeted returns will be taken into account when setting the fees.

“Under the new system, funds that achieve their predetermined investment return target will receive a similar level of fees as they receive now. If the actual return exceeds the target, however, they will be paid progressively more in proportion to the results.

“Missing the target will lead to lower fees, but even then, the payment will be comparable to the fees paid to passively managed funds sitting on a similar amount of assets. Investment returns will be evaluated using a time frame of three to five years, rather than looking at short-term returns.

“Actively managed Japanese stock funds used for GPIF assets did not earn their keep over the past decade, with their investment returns undershooting index growth by 0.04 percentage point despite the funds being paid higher than passively managed funds. The GPIF hopes performance-linked fees will change this around.

‘”We want to motivate fund managers to improve their investment management capability,” President Norihiro Takahashi said.'”

It would be nice if the Fund were to recognise in 2018 that when it makes information selectively available to favoured media, even before the news appears  on its own web site, it does not help make markets more efficient and honest — a goal to which it has repeatedly says it aspires and is trying to make fund managers responsible for achieving.

It is particularly strange that GPIF should favour the Nikkei when it is the lead offender in leaking the financial reports of companies listed on the Japan Stock Exchange before they  are made know to the market.

This is the sort of practice the Fund should be working hard to stop.

A list of who managed what investments for GPIF at the close of the financial year on 31 March 2017 can bee seen under “The Giants” tab at the top of 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 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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