Tuesday, July 10th 2018
On July 6th, GPIF (Government Pension Investment Fund, Japan) has released their portfolio for alternative investment in their investment results for fiscal year of 2017. They have listed their annual rate of return as +6.9%, with asset size at 156.4 trillion JPY(1.48 trillion USD) . On the Japanese summary of their investment results, they list their activities in Alternative Assets. This is the first time GPIF is disclosing details of their asset allocation and investment in Alternative Assets.
Their diversified investments have been centered on “core” infrastructure assets that can offer stable income gains. Total Investments are 213 billion JPY (2 billion USD) as of end of March 2018 (end of the fiscal year of 2017).
GPIF’s first infrastructure investment was in 2014, carried out as an investment partnership with the Canadian public pension OMERS and DBJ. Public records show that the aim of the infrastructure investment was to invest with more experienced partners thereby gaining professional knowledge. In their summary, they have listed two case studies from their investment through this partnership. It is named as GLOBAL ALTERNATIVE CO-INVESTMENT FUND I, and value of investment was 146.6 billion JPY (1.38 billion USD).
They have also been investing in Fund of Funds through Pantheon (101 million USD) and StepStone (361 million USD) from the fiscal year of 2017. They listed the case study of their investments into Birmingham airport and Bristol airport. They have mentioned the number of customers has been steadily changing, as well as airport usage fees, offering stable income.
At the end of the fiscal year of 2017, GPIF listed the total amount of infrastructure investment at 196.8 billion JPY (1.86 billion USD). By country, the proportion of investments is largest in the UK at 57%, 15% in Australia and Sweden 10% in Spain, and 3% in Finland. For infrastructure investment types, Sea ports were the highest at 27%, followed by water and sewage companies at 24%, Airports at 21%, electric power at 18%, and oil pipelines at 10%. They aim to make stable income in core, diversified infrastructure assets.
For real estate investments, at the moment they are focused on seeking out core funds. They began investments in 2017 through FOF with Mitsubishi UFJ Trust and Banking for Japanese core real estate.
The investments were to domestic private REITs (open ended core funds for institutional investors), and GPIF was investing to 8 private REITs out of 23 private REITs in Japan, and total value of portfolios was about 8.1 billion JPY (76 million USD). The 8 private REITs were BROADIA, DBJ, DREAM, MITSUI FUDOSAN, NIPPON OPEN ENDED REAL ESTATE INVESTMENT, NIPPON TOCHI-TATEMONO, NOMURA REAL ESTATE, and SG ASSETMAX. They are expected to invest in more private REITs, and increase their investment amounts as well.
By sector, their investments to office is 40%, logistics is 23%, residential is 19%, retail is 15%, and others are 3%.
GPIF is in the selection process for their overseas FOF investments.
For private equity investment, GPIF`s investment was 8.2 billion JPY (77 million USD)
GPIF have emphasized ESG commitment, steadily repeating its importance, and moving Japanese investors to follow this trend.
GPIF’s announcement about their portfolios in alternative investment will be an influential guideline for other Japanese institutional investors.
GPIF’s maximum asset allocation to alternative investment is 5%, but is still at 0.14% of their total assets. We may see further acceleration into alternative investments in 2018.
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