GPIF eyeing asset owner partnerships
Japan’s Government Pension Investment Fund is contemplating investment partnerships with its global peers, its chief investment officer, Hiromichi Mizuno, has told AsianInvestor.
The establishment in recent years of formal relations with other public pension funds has now reached a level where combined investments are being discussed, he confirmed.
“That is what is going to happen not very far into the future. We will start discussing with some of the other asset owners about partnerships for co-investments,” Mizuno said, without providing further details.
Of course, when you're comfortably the world’s largest pension fund manager (and asset owner), with ¥161.76 trillion ($1.49 trillion) of assets under management (AUM) as of September 30, you technically have no peers.
But among the potential partners are the California Public Employees' Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS), with whom GPIF organised the 5th Global Asset Owners’ Forum in March. With $376.9 billion and $230.2 billion in AUM, respectively, these were the world's 13th and 22nd biggest asset owners as of end-2018, according to the Asset Owner 100 published by Willis Towers Watson in November.
Among the other heavyweight asset owners represented at the Forum were Dutch pension funds ABP and PFZW/PGGM, New York State Common Retirement Fund, Florida State Board of Administration, Ontario Teachers’ Pension Plan and British Columbia Investment Management Corporation.
GPIF founded the Global Asset Owners’ Forum together with California-based pension funds CalPERS and CalSTRS in 2017. Mizuno said that GPIF did so because of the lack of a forum exclusively for asset owners.
When he attended events such as public or private conferences, he found that service providers and asset managers were always present in the room too. So Mizuno found it “very uncomfortable” to discuss important common issues where asset owners can gain through collaboration.
“I think that asset owners used to talk too little with each other,” he said. “Even the best resourced asset owners are not as well-resourced as the asset managers. So we need to collaborate; it gives us better leverage to achieve mutual goals.”
Mizuno said he also noticed a mismatch when attending investor conferences as GPIF’s CIO, between the very well-resourced and sizeable asset owners presenting on stage and the less resourced, smaller asset owners in the audience.
“So what is said on stage by large asset owners might sound cool, but there is no way for the smaller asset owners to mimic the idea of taking everything in-house,” Mizuno said.
ALTERNATIVES
Although Mizuno did not wish to elaborate on GPIF’s specific plans, some hints as to what they might be can be found in the changes in the pension fund’s structural framework and strategy.
In June 2018, the pension fund received regulatory clearance to participate in limited partnership schemes for alternative assets, owning up to 50% of an investment vehicle. Until then, because of statutory limitations, the pension fund was only able to invest in alternative assets through funds of funds and commingled funds.
Subsequently, GPIF started a process that looks set to lead to limited partnerships with alternative asset managers. Sources in the Japanese alternative asset management industry told AsianInvestor that these mandates could likely include more partnership-inspired investment vehicles, such as joint ventures and club deals.
Another indication that further efforts in the alternatives space are brewing was when Mizuno summed up where GPIF is seeking to hire.
“One area [to recruit in] is ESG stewardship because when I came onboard there was basically none. Afterwards we built ESG and stewardship activities. That area was not originally in the planning and we still need to add capabilities,” Mizuno said.
“We are also trying to bring more AI [artificial intelligence] into our operations and that probably requires some different type of people, for data management. The third one is alternatives because it is actually a quite human capital-intensive business.”