GPIF earmarks more than $6bn for private equity

Japan’s Government Pension Investment Fund, the largest of its kind globally, has earmarked more than $6 billion for private equity.

In its latest annual report the ¥186 trillion ($1.7 trillion; €1.4 trillion) institution said it had committed up to ¥708.1 billion to deploy via its gatekeepers and fund of funds managers to deploy. This figure was previously undisclosed.

GPIF’s private equity portfolio grew ¥36.7 billion in fiscal year 2020 to ¥61 billion as of 31 March.

The pension added Mitsubishi UFJ Trust and Banking Corporation as gatekeeper and Hamilton Lane Advisors as a fund of funds manager in January this year. The pair join existing fund of funds manager NB Alternatives Advisors and gatekeeper Neuberger Berman East Asia.

Its private equity portfolio has radically changed over the past year. North America is now the largest geographic exposure at 35 percent, followed by China at 22 percent and India at 13 percent. In March last year, China accounted for 36 percent and North America just 4 percent. ­­­­

Private equity remains just a fraction of GPIF’s portfolio. It has committed ¥2.98 trillion to alternatives, including ¥1.14 billion and ¥1.13 billion to infrastructure and real estate, respectively. The alternatives portfolio was valued at ¥1.34 trillion at the end of March, of which ¥736.2 billion was infrastructure and ¥544.7 billion was real estate.

GPIF is permitted to invest up to 5 percent of its overall assets into alternatives.

The pension has only been active in alternatives since the appointment of former Coller Capital executive Hiromichi Mizuno as chief investment officer in 2015. On taking over, Mizuno was charged with overseeing its pivot towards riskier assets and away from traditional Japanese government bonds.

Mizuno’s five-year tenure came to an end in April last year. He was replaced by Eiji Ueda, who joined from Goldman Sachs.

The fund is a vocal proponent of ESG. It released a joint statement with the California State Teachers’ Retirement Scheme and USS investment Management early last year warning managers that focusing solely on short-term returns without considering other stakeholders would be to ignore “potentially catastrophic systemic risks”.

These issues had become even more pressing during the pandemic, Yoshitaka Todoroki, GPIF’s head of private equity and infrastructure, told delegates at Private Equity International’s Responsible Investment Forum Tokyo in October.

“If we’re going to go back to normal, let’s go back to much better than before,” he said. “Rather than stepping back from the covid-19 pandemic issues, we continue to pursue how we can materialise these ESG related ideas. It is becoming far more important to drive ESG issues across GPIF’s portfolio.”