Editorial Board Spotlight: Candid Q&A with Naoya Sugimoto

Naoya Sugimoto is co-chief investment officer and head of the global investments department at the Japan University Fund (JUF), based in Tokyo.

Naoyo Sugimoto

Established in 2021, JUF started investing in March 2022 and is a relatively new asset owner with a portfolio of ¥10.96 trillion ($77.8 billion) as of end-March.

JUF, managed by the Japan Science and Technology Agency (JST), aims to secure long-term and stable financial resources for Japanese universities so that they can strengthen their academic research infrastructure.

In the first of a two-part series, AsianInvestor puts Sugimoto in the hot seat of our rapid-fire question round, to learn more about the man behind the decisions shaping a global portfolio.

What does a typical morning look like for you? Do you have any rituals?

Jokes and 'whys' are my morning ritual. I have three kids, and they're chattering and dashing about with boundless energy from the moment they wake up.

My morning routine involves making them laugh and fielding a barrage of their questions, like 'Why don't plants move?', 'Can you feel earthquakes in the sea?', and 'Why is light the fastest thing in the universe?'

I make it a point to answer them as best I can, rather than saying 'I don't know.' It's a far better wake-up call than coffee!

This time with my children is what powers me through the day, and this mental exercise gives me a clear mind to tackle the financial market: What's driving stock-bond correlation? How does monetary tightening work when fiscal stimulus is still in play? What will volatility look like if we've shifted to a new inflation regime? 

What is your biggest motivation for your job?

The fund's purpose is my motivation. The Japan University Fund was set up to generate financial resources for research at Japanese universities.

Given Japan's demographics, science and technology are crucial for the country's future growth.

Arthur C. Clarke, the sci-fi writer, once said, 'any sufficiently advanced technology is indistinguishable from magic.'

I'm thrilled to play a part in nurturing these wizards through investment management. I believe they'll make the world a better place with their magic.

Who would you consider your role model (either in your personal or professional life), and why?

My parents, without a doubt. They enjoy life even when things get tough. They're not caught up in endless desires, they laugh at silly jokes, and they appreciate each season as it comes.

Their approach to life reminds me not to get trapped in a cycle of constant wanting, to stay connected with family and friends, and to remain in touch with nature.

What's the most unconventional piece of advice you've ever received that actually worked?

'When you're undecided about going somewhere, just go.'

The person who gave me this advice explained it like this: When you're sure of the benefits, you'll go. When you think the risks outweigh the benefits, you'll stay put. When you're undecided, you see the benefits and understand that the risks are manageable.

All you need to do then is make the call. There's a similar quote I like: '"Why not?" is the motto for an interesting life.'

What assets do you think are currently being overlooked by most investors?

Valuation is key when it comes to investment objectives.

The same asset might look great for some investors based on their goals, but poor for others.

Objectives and constraints include expected return, risk tolerance, time horizon, tax, liquidity, accounting, and so on.

It's crucial for investors to remember that valuations are relative to their own investment situation.

What do you think will be the biggest challenge for asset managers in the next decade?

Technologies. Opportunity and challenge are two sides of the same coin.

Emerging tech presents opportunities for asset managers to boost their investment capabilities. On the flip side, without these technologies, investment quality will lag the industry.

Take data analysis, for instance. Investment-related data is growing and diversifying, what we call big data and alternative data.

The world will be increasingly scanned and sensed by IoT [internet of things] and communication tech.

On the analysis side, the sheer volume of data will be too vast and complex for humans alone to manage. Machines will step in, with tools like machine learning and cloud computing platforms.

Another example is financial technology.

Throughout financial history, starting with stocks as a tradable form of business, many technologies have expanded the financial market, such as derivatives, securitisation, and ETFs [exchange traded funds].

I wouldn't be surprised to see new financial technologies emerge.

What do you think is needed to be successful in any role in your view?

Motivation, hands down. The key to success is maintaining energy for your role.

As Clayton M. Christensen says in How Will You Measure Your Life?, incentives come from outside, but motivation wells up from within.

To maximise motivation, it's crucial to know yourself—what you enjoy and what makes you happy.

Motivation will guide you to success by developing your skills and defining how you measure that success.

If you could have lunch with any historical figure, who would it be and what would you ask them?

Albert Einstein, no question. His theory was miles ahead of the physics of his day.

Just as Isaac Newton was 'standing on the shoulders of giants,' Einstein could certainly leverage the theoretical work of earlier scientists.

If I could have lunch with him, I'd love to ask how he managed to take such a leap from the shoulders of those giants.

What's the most important lesson you've learned from a mentor in your career?

Playing within a team.

My mentor once told me that as students, we are encouraged to answer questions without any outside help. But you are not a student now. Business doesn't confine your work to just yourself.

You're meant to teach each other and share best practices.

Moreover, what you can do solo is limited. You can only work 24 hours a day, 365 days a year at the most.

Team work amplifies both you and your team. Working together, you'll achieve far more than you ever could on your own.

What is the most significant way in which your leadership style has evolved over your career?

In the beginning, I identified key elements of leadership as direction, allocation, solution, and motivation.

Direction sets objectives and goals for the team. Allocation divides up time, budgets, and resources.

Solution helps when the team hits snags. Motivation aligns what a team member should do with what they want to do.

Later on, I tried to elevate these elements to a higher, broader level.

Direction links to the entire organisation's objectives. Allocation stems from strategy. Solution comes from bringing in and connecting with external partners.

I'm still working out how to maximise everyone's motivation. No two people have the same preferences. There's no one-size-fits-all approach.

The only way I can manage it now is through communication. If you have any good ideas, I'm all ears!

What advice would you give to someone considering a career shift from an asset manager to an asset owner, and why?

It's not a matter of better or worse; they're just different.

I'd say the main difference is that generally, asset owners are closer to the ultimate purpose, tied to their liability, and work with a wide range of asset managers.

Through conversations with various asset managers, it's fascinating to get a sense of the spectrum of market views and sentiments.