GPIF’s long-term strategy blocks CIO clarification
Japan’s Government Pension Investment Fund (GPIF) has been forced to kick the can further down the road on who will be its long-term chief investment officer.
On October 1 it was announced that Hiromichi Mizuno will continue his tenure as CIO for another six months, until March 31 next year. The relatively short-term extension for Mizuno, who officially took up the reins as CIO in January 2015, reflects the fact that appointments for GPIF executive directors cannot be extended further than the tenure of current GPIF president Norihiro Takahashi, according to a GPIF spokeswoman.
"If Mizuno has the strong will to continue his current role, the extension for six months is natural,” one Tokyo-based investment advisor familiar with GPIF’s investment strategy told AsianInvestor.
But the solution is not ideal, he added.
“Usually, a two-year update of a contract is the ordinary procedure in public organisations. This six-month extension has to be considered a temporary solution.”
Takahashi’s term as GPIF president will expire at the end of March next year. That is due to the end of GPIF’s current mid-term plan that spans over five year periods. After that, a new president might have been appointed politically. The same goes for the role of CIO.
The next mid-term plan is currently going through the official political approval process. It should be published around the end of March 2020, the spokeswoman told AsianInvestor.
BIG SHOES TO FILL
It is unclear if the extension that has been granted Mizuno is to be seen as a sign of an ambition to keep him in the role long-term, or if it just a makeshift move until a new CIO can step in to implement GPIF’s next five-year mid-term plan from April.
A new CIO would have big shoes to fill.
“It will be difficult to find his successor. Mizuno-san has taken the initiative to transform GPIF on many areas, such as ESG and building a network with similar global asset owners,” the investment adviser said.
Mizuno’s impact goes a long way beyond the GPIF’s financial performance on his watch. He has overseen a historic shift in the world’s biggest pension fund away from domestic bonds and into foreign and domestic equities – and even alternatives – which has opened the institution to far more risk.
After the GPIF announced a record quarterly loss and a lukewarm 2018 fiscal year ending March 2019 (FY2018), the new investment strategy came in for plenty of criticism, as did Mizuno as the strategy’s poster boy. GPIF returned 1.52% in FY2018, down from 6.9% in FY2017, amid wide losses in its equity exposure during the last three months of 2018. As of end-June this year, GPIF’s assets under management stood at ¥159.2 trillion ($1.474 trillion).
Still, Mizuno has transformed GPIF into an active – proponents might even say “activist” – force for change, not only within the domestic market but also in the way that it has been perceived by foreign investors. He has spearheaded efforts to change areas such as ESG, the use of artificial intelligence as well as performance-based fees.
Before joining GPIF, Mizuno worked as a private equity and banking executive, latterly as a partner at the London-based private-equity firm Coller Capital.