What GPIF thinks about crypto, other niche assets
Back in March, the largest pension fund in the world, Japan’s Government Pension Investment Fund, made waves when it sent out a request for information (RFI) about illiquid assets, with a special mention for crypto assets such as Bitcoin.
“We are always looking at opportunities given our size to see if there are any market or investment developments that we should study to understand further. I think crypto assets are one of these developments, and so are forests, farmland, and gold,” Eiji Ueda, Chief Investment Officer and executive managing director at GPIF, told AsianInvestor.
He emphasised that, for GPIF, there is a long process between looking at developments in financial markets to even considering investing in new types of assets. The RFIs were merely a preliminary request for research to learn more about these types of assets.
“We should look up the new methodology or new technologies relevant for investments. RFIs are a part of that process, but it does not mean we are planning to invest,” Ueda said.
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And while GPIF’s interest in learning about crypto assets made headlines – to the effect that the world’ largest pension was about to give cryptocurrencies its stamp of approval – the CIO looked at the information and has reached a different conclusion.
“Right now, the overall impression of these assets like gold, farmland, or crypto assets it that the market is not where GPIF should actively invest given the size. We are working on the research, but I think the size of the market is not there yet,” Ueda said.
PRIVATE CREDIT
Still, GPIF is looking actively to explore new investment opportunities beyond just equities and fixed income.
“We are looking at all those opportunities. If we find some assets, which are investable with our size, and the risk-return profile makes sense for us and for the people of Japan, we should be open to think about adding such assets to our current investment portfolio,” Ueda said.
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One example of a trend that the CIO has noted is private credit, which has gained traction due to factors like higher interest rates and banks retracting from parts of the lending market.
“There are a lot of assets, which we don't invest in now but has become reasonably more active in the marketplace. For example, private credit is seeing a boom right now, to some extent.”
As of end-2023, GPIF had ¥224.7 trillion ($1.4 trillion) under management. Of that, 49.79% was invested in equities, with 24.66% invested in domestic equities and 25.14% in foreign equities. Fixed income made up 50.81%, with a split of 26.95% in domestic fixed income and 23.86% in foreign fixed income.
NO LIMITS
In alternatives, GPIF currently invests in private equity, infrastructure, and real estate.
“But we shouldn't limit ourselves and we'll think about others, also across traditional asset classes. But given our size, and needs for rebalance, and the returns we have been getting in the past, there is no imminent need for us to aggressively diversify,” Ueda said.
As of March 31, GPIF’s alternatives portfolio was valued at ¥3.7 trillion, making up 1.46% of its total portfolio and well below a cap of 5%.
GPIF has emphasised the importance of gathering information as well as sharing its research publicly. Its main focus, however, has been on gaining insights and knowledge for internal purposes.
“We have no intention to educate other people. We try to learn how to refract and potentially develop our portfolio,” Ueda said.