GPIF mulls private equity applications

The Japanese pension giant has received 23 proposals from private equity funds of funds in its first recruitment drive for external managers for alternatives.

The Government Pension Investment Fund of Japan has received proposals from 23 private equity firms in response to its first-ever call for applications for private equity, real estate and infrastructure managers, which it issued in April this year.

GPIF is recruiting private equity funds of funds targeting North America, Europe and Japan, and focused on a number of strategies such as buyouts, growth capital, private debt and venture.

The pension is working with Towers Watson Investment Services and Russell Investments Japan to carry out due diligence and the evaluation of managers.

The pension giant, which manages ¥144.9 trillion of assets, saw no change in its private equity and infrastructure investments in FY2016 – maintaining its ¥4.2 billion for private equity in partnership with International Finance Corporation and the Development Bank of Japan committing, as well another ¥96.4 billion for infrastructure deals alongside DBJ and the Ontario Municipal Employees Retirement System, it said in the report.

It posted returns of 5.9 percent or ¥7.9 trillion ($71 billion; €61 billion) for fiscal year 2016, reversing its $52 billion investment loss in FY2015 and its worst performance since the global financial crisis.

GPIF president Norihiro Takahashi attributed the pension’s positive returns to robust equity prices in Japan and abroad, buoyed in the second half of 2016 by “a more favourable economic environment”.

GPIF reported a marginal increase in its alternatives portfolio in FY2016, from 0.06 percent in FY2015 to 0.07 percent as at end-March 2017, which is still well below its 5 percent investment target, according to its latest annual report.

Japanese stocks made up 23 percent of GPIF’s asset mix as at end-March 2017, slightly higher than the previous year’s 21.8 percent. Foreign equities – under which its current private equity investment is categorised – accounted for 23 percent of assets, up from 22 percent the year before. Meanwhile domestic bonds made up 32 percent; foreign bonds, 13 percent; and short-term assets, 9 percent.

GPIF’s allocation to alternatives may be slow, but the pension giant has been gearing up its alternatives capability in the past year in line with the practices of global pension funds. It set up a Stewardship and ESG division in October and started integrating ESG indices in its investments. GPIF also held two global asset owners’ fora to exchange ESG best practices with pension heavyweights, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System as co-organisers. In addition, the pension fund also joined the UK 30% Club and the US Thirty Percent Coalition in November to demonstrate its belief in gender diversity.