Chikyoren, the US$185bn (€165bn) pension fund association for Japanese local government officials, has hired Nomura Asset Management for its debut real estate allocation.
The institution – one of Japan’s ‘big four’ public pension funds – revealed that it chose Nomura to manage a domestic real estate mandate.
Last year, Chikyoren issued request for proposals (RFPs) for managers to oversee domestic and international real estate and infrastructure investment.
Last year, the US$65bn Federation of National Public Service Personnel Mutual Aid Service (KKR) also issued RFPs for global and domestic real estate investments.
All four of Japan’s big public pension funds are expected to move into international real estate in the coming months, led by the world’s largest pension fund, the US$1.15trn Government Pension Investment Fund (GPIF).
The fourth, the US$35bn Mutual Aid Corporation for Private Schools of Japan is also expected to issue RFPs.
GPIF recently established a new asset allocation, introducing alternative investments to its long-held mix of equities and bonds. The rest of the big four have all adopted the same allocation model.
According to Yukihiko Ito, managing director at Japanese placement agency Asterisk, the model portfolio allocates 5% to alternatives, and it is estimated that between 1% and 3% will go to real estate.
Writing in IPE Real Estate this year, he said that “considering Japan’s real estate market makes up roughly 10% of the global market, the four pension whales would be hard pushed to invest 2% of their portfolio or ¥3.4trn into the domestic core market”. He said: “They will, no doubt, have to invest overseas.”
Yukihiko Ito believes large global investors such as Norway’s Government Pension Fund Global and Canada Pension Plan Investment Board “play a role in influencing” the Japanese funds.
“Thus, fund managers and investment partners who have experience and are capable of working with large international investors are at a distinct advantage,” he said.
“As well as looking for managers with expertise and a good track record, Japanese investors’ inexperience means there will be heavy emphasis on reputation.”