Panel nudges Japan’s GPIF toward PE

The panel's recommendations include seeking investments in alternatives and more autonomy for GPIF.

A Japanese advisory panel has issued a report on reforming public pension funds that supports moves toward investment in alternatives such as private equity.

Some recommendations were aimed specifically at Japan’s Government Pension Investment Fund (GPIF), the world’s largest, managing 121 trillion yen (€897 billion; $1.2 trillion) in retirement savings.

“The committee clearly recommended Japanese public pensions to consider investing in new asset classes such as `REITs, real estate investments, infrastructure, venture capital, private equity and commodities’”, said Joji Takeuchi, co-founder and chief executive officer of Brightrust PE Japan, a private equity research & advisory firm based in Tokyo.

“I think it was very positive, especially in its clarity.” 

The advisory committee also recommended more autonomy to GPIF to build up its investment and risk management resources. 

“In fact, the committee appears to view these changes as mandatory for GPIF's illiquid asset investment,” Takeuchi said.

However, illiquid investment such as private equity was not included among the actions to be taken immediately or within next 12 months, he added. 

“This was a caveat in the recommendation. Though some people hoped for an action in 2014, if GPIF, and possibly other large public pensions, take necessary steps in the next 12 months and can start private asset investments in 2015, I would think it should be seen as a very sensible development.”

The panel also said pension funds should review domestic bond holdings and consider investing more in overseas assets.

GPIF reported total returns of 10.23 percent for FY 2102 (to March 31st 2013), according to its annual report.