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ADBI-OECD Roundtable on Capital Market Reform in Asia
Session 4
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14 March 2014
Tokihiko Shimizu
Director General
Research Department
Government Pension Investment Fund (GPIF)
Topics
1. Overview of GPIF
2. Why do we invest in infrastructure space?
3. The way we started
4. Our challenges for the future
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1. Overview of GPIF
 Managing Japanese national pension reserve funds
 Safe and efficient investment from long term perspective
 Risk management by diversifications
 AUM*1 : USD 1.3 trillion (JPY129 trillion)
 Asset Allocation
Domestic fixed income
Domestic equity
Foreign fixed income
Foreign equity
Short term asset
 To be revised in every 5 years
target*2
60%
12%
11%
12%
5%
actual*1
55.22%
17.22%
10.60%
15.18%
1.77%
Based on actuarial valuation by Ministry of Health, Labour and Welfare
 Next review will be scheduled by April 2015, or earlier if needed
*1 as of 31st December, 2013
*2 Review of medium term plan as of June, 2013
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1. Overview of GPIF
Actuarial valuation is under process
 Risk Tolerance
probability which bond investment return underperforms
against nominal wage growth
 Target Return
nominal wage growth rate + α
 More diversified portfolio
based on the forward looking analysis
from domestic bond oriented investment strategy
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2. Why do we invest in infrastructure space?
 Feasibility



study on alternative assets (October 2012 - March 2013)
Benefit of liquidity premium / portfolio diversification
Unit trust or discretionary account as possible options under
current regime
Suggested liaising with experienced institutional investors
for their capabilities and expertise
 Discussions
by GPIF investment committee since 2012
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On the other hand
 Review investment strategies of public funds
 Reported by Government Panel on 20 November 2013
Review Portfolio, Strategic Asset Allocation
 Further diversification i.e. PE, Infrastructure, Real Estate, etc.
 Set up “Baby Funds”
 Enhance governance structure and risk management
 Portfolio construction based on “forward looking” risk analysis

 “Economic measures”
 Reported by Cabinet Office on 5 December, 2013
 Expansion of the scope of GPIF administration
 “Recommendations for revitalizing Financial and Capital Markets”
 Reported by Government Panel / MoF / FSA on 13 December, 2013
 GPIF needs to diversify investment strategies

Possible joint investment with overseas pension funds and DBJ
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2. The way we started
 Started infrastructure investment Program
 Announced on 28 February, 2014
 Co-investment with like minded investors

DBJ/ OMERS to start with (non-exclusive)
 Up to USD2.7 billion over 5 years (0.2% of AUM)
 Expected Benefit
 Cash flow profiles
 Diversification with low correlation to public market
 Build knowledge and skill set though co-investment investment
 Seek other potential partners for co-investments including PE
and Real Estate
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3. Our challenges for the future
 Asset allocation comparison
Investor name
Country
AUM
(US$ billion)
Alternative
investment %
CPPIB
Canada
190
48%
GPF-Global
Norway
831
1%
CalPERS
United States
284
23%
ABP
Germany
413
25%
NPS
South Korea
351
9%
GPIF
Japan
1,223
?
Source : respective website
Currency :as of 2013/12/31
as of 2013/06/30
as of 2013/12 :CPPIB , GPF-Global, CalPERS, ABP, GPIF as of 2013/6 :NPS
1CAD=0.941USD 1NOK=0.165USD 1EUR=1.378USD 1USD=105.105JPY
1KRW=0.00087USD 1USD=99.335JPY
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3. Our challenges for the future
Trust based pension system
Political/regulatory stability/visibility, less investment restriction
⇒Pension funds can allocate certain amount of capital to infrastructure
investments
PPP market is widely accepted
Matured bond market
DB system with widely underfunded
Active privatization
Strong investors’ appetite
DC system
Direct investing Model
(GLP)
Outsource Model
with open-ended funds
Need a number of internal resources
Governance and fee issues
for better control / lower cost
Source: Inderst G., Della Croce, R., (2013), “Pension Fund Investment in Infrastructure: A Comparison between Australia and
Canada”, OECD Working Papers on Finance, Insurance and Private Pensions, No.32, OECD Publishing.
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3. Our challenges for the future
 Possible approach for further exposure to alternatives





Gatekeepers or FoF / Separate Accounts
Single funds
Co-investment with funds
Direct investment
Syndication / Club deals
 Within regulatory framework
 Every option is open
 Combination of different options
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APPPENDIX – JAPAN INFRASTRUCTURE LANDSCAPE
 Status
 Historically owned / managed by public sector
 Opportunities for privatization / maintenance(PPI)
 Matured bond and loan market
 Public sector is open to sell concessions
 Sendai Airport
 Kansai International Airport
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