Japan’s GPIF more than doubles alts exposure as pandemic batters returns

The world's largest pension fund's private equity fund investments grew almost 30% during the last fiscal year.

Government Pension Investment Fund of Japan, the world’s largest pension fund, has more than doubled its exposure to alternative assets over the past year.

Alternatives accounted for 0.61 percent of GPIF’s ¥150.6 trillion ($1.4 trillion; €1.2 trillion) investment portfolio at the end of March, according to its 2019 annual report. This compares with 0.26 percent at the same point last year.

GPIF’s private equity fund investments grew 29 percent to ¥18.5 billion over the period, the report noted. Real estate fund of funds investments tripled to ¥380.8 billion and infrastructure fund of funds investments more than doubled to ¥390.4 billion.

The fund intends to deploy up to 5 percent of its total portfolio into alternatives.

GPIF reported a ¥17.7 trillion investment loss across the entire portfolio for Q4 as covid-19 rocked foreign and domestic equities. It posted an ¥8.2 trillion loss for the year, representing a negative 5.2 percent annual return.

Its private equity portfolio has recorded a 4.03 percent internal rate of return in US dollars since 2015, per the latest report.

The fund selected Neuberger Berman Alternatives Advisers in April to manage a global private equity fund of funds mandate covering primaries and co-investments.

GPIF has ramped up its alternatives activity in recent years under the guidance of former chief investment officer Hiromichi Mizuno, whose five-year tenure came to an end earlier this year. He was replaced in April 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 in March warning managers that focusing solely on short-term returns without considering other stakeholders would be to ignore “potentially catastrophic systemic risks”.