Japan’s largest pension fund announced new CIO and new portfolio policy

5 Apr, 2020 06:49
source: Singularity Financial

Singularity Financial Hong Kong April 5, 2020 – by Zohar Lee

The world’s largest pension fund, Japan’s Government Pension Investment Fund (GPIF), which managed 169 trillion yen ($1.5 trillion) as of end-December, announced a new portfolio policy favoring foreign fixed income at the expense of domestic government bonds for the next five years.

GPIF raise its allocation target for foreign bonds

GPIF said, on march 31, it would raise its allocation target for foreign bonds to 25% from the current 15%, marking a shift from unprofitable domestic bonds to foreign assets.

Japanese government bonds, meanwhile, will drop to a target allocation of 25% from the 35% mark announced in October 2014 — which itself was a dramatic fall from a previous weighting of 60%.

The fund’s operating instructions allow actual allocations to range by 7 percentage points on either side of the 25% targets for domestic bonds and foreign equities, 8 percentage points on either side for domestic equities and 6 percentage points on either side for foreign bonds.

GPIF announces new president, new CIO

Hiromichi Mizuno, chief investment officer for GPIF, ended his stint overseeing the world’s largest pension fund on March 31. Mizuno’s term was originally scheduled to conclude in October 2019 but was extended to March. He joined in January 2015 as the fund’s first dedicated CIO, and reportedly led large transitions in the portfolio’s strategic asset allocation while adhering to a strong environmental, social, and governance (ESG) mentality.

Masataka Miyazono has taken over as the president of the world’s largest pension fund, the Government Pension Investment Fund (GPIF) on April 1st and Eiji Ueda has been appointed as its executive managing director and new chief investment officer.

Ueda joined Goldman Sachs in 1991 and had been co-head of fixed income, currencies and commodities since 2009. In 2016, he also began to serve as board director of Goldman Sachs’ securities division.

GPIF stand in favor of sustainability investing

Last month, a letter was signed by Japan’s Government Pension Investment Fund (GPIF) CIO Hiromichi Mizuno, the California State Teachers’ Retirement System (CalSTRS) CIO Christopher J. Ailman and the U.K.’s USS Investment Management CEO Simon Pilcher, say that their “multidecade framework” requires them to invest with sustainability and social impact because, after all, retirement funds by their very nature are playing a long game.

Ignoring issues such as climate change to maximize short-term returns would create “potentially catastrophic systemic risks” to their portfolios, the heads of the funds said in a statement.

The firms wrote they aren’t interested in investing in “companies that seek to maximize corporate revenue without considering their impacts on other stakeholders — including the environment, workers and communities. They also took aim at short-term-focused asset managers, saying they “are not attractive partners for us.”

Two more big asset owners joined after the letter was issued, according to The Financial Times: The U.K. pension fund Railpen and the British Columbia Investment Management Corp.

GPIF’s move on green bonds

GPFI has teamed with the Dutch Ministry of Finance to issue sustainability bonds following arrangements with two other European agencies to issue green bonds on March 2020.

GPIF said the Dutch National Finance Corporation (BNG Bank) had recently proposed a new investment opportunity for sustainability bonds.

The aim is to allocate funds to both environmental projects and social projects to companies managing GPIF’s assets.

Outgoing GPIF president Norihiro Takahashi said: “GPIF and the managers it outsources have signed the Principles of Responsible Investment (PRI), which calls for ESG integration into investment analysis and decision-making processes.”

Separately, GPIF recently formed a partnership with Swedish state debt agency Kommuninvest to promote and develop sustainable capital markets through a focus on green bonds.