GPIF mulls private equity applications

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.

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.

While it is not clear in which way secondaries will play a part in GPIF’s private equity portfolio, Japan-based industry sources have previously told Secondaries Investor that such funds are the logical place for Japanese institutions wanting to gain exposure to alternatives to invest. J-curve mitigation and the ability to evaluate managers before deciding to commit to their primary vehicles or through co-investments made secondaries the ideal starting point, they said.

The pension giant, which manages ¥144.9 trillion ($1.3 trillion; €1.1 trillion) of assets, saw no change in its private equity and infrastructure investments in fiscal 2016 – 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 for fiscal year 2016, reversing its $52 billion investment loss in fiscal 2015 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 fiscal 2016, from 0.06 percent in fiscal 2015 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.

GPIF’s 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, California Public Employees’ Retirement System and 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.