Japan's GPIF calls for real estate, infrastructure multi-managers

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Japan’s ¥145trn (€1.24trn) Government Pension Investment Fund (GPIF) has issued a call to real estate and infrastructure fund-of-funds managers to apply for investment mandates.

The world’s largest pension fund, which has been planning to create a 5% allocation to alternative asset classes, has confirmed it is looking to invest in core real estate and infrastructure funds on a global basis.

GPIF said it is looking for “fund of funds products” to be established as separate accounts for both asset classes.

It is looking to invest in “mainly core-type real estate funds in primarily developed countries”, excluding Japan. The pension fund is looking to appoint a separate domestic property fund-of-funds mandate.

Similarly, it is looking to appoint an infrastructure fund-of-funds manager to manage “diversified investments in mainly core/brownfield infratructure funds primarily in developed countries”.

GPIF has defined core as “generating a stable income” and excludes “products invested in listed funds”.

Registration has opened and a review process will start on 1 June.

The announcement has been eagerly anticipated by the alternative fund management industry.

Earlier this year, GPIF hired former Mitsui Fudosan managing director Hideto Yamada as head of real estate.

Yukihiko Ito, managing director of Tokyo-based placement agency Asterisk, said the long awaited announcement “serves as a green light for all Japanese institutional investors to start global real estate investment, after the long time hiatus for overseas real estate after the Japanese bubble burst”.

Ito, who has been tracking GPIF’s gradual move into alternatives, wrote in IPE Real Estate in 2016: “An investment from the largest pension fund, GPIF, presents a significant sum to the global real estate market; but more importantly, as a trustworthy government entity it also provides other Japanese investors with a compelling reason to follow in the same direction.”

The announcement follows a statement last month from Japan Post Bank announcing plans to shift to international diversified investment. The ¥204trn investor, the world’s largest deposit holder, last year announced a new division for real estate as part of its plan to reduce its exposure to Japanese government bonds and increase investment overseas.

Investors from Japan are primed to play a key funding role for global infrastructure and real estate, according to analysis from AMP Capital.

With assets under management approaching ¥500trn, the Japanese institutional investment environment is undergoing a transformation and represents a substantial source of capital for investment into real assets across the globe, AMP said.

Toshiaki Yamashita, managing director for Japan at AMP Capital, said: “The unique characteristics of the market in Japan have impacted investor sentiment and behaviour as few other economies have experienced as long a period of low growth and low yield.”

Japanese investors are broadly seen as conservative, Yamashita said, with more than 50% of financial assets in deposits and around 5% in investment trusts.

He said: “This allocation may change, however, as government policies encourage investors to shift from deposits to investments, investors begin seeking higher-yielding assets after a prolonged period of low growth, and an easing of institutional investors’ aversion to risk.”

AMP Capital said infrastructure debt is expected to be one of the beneficiaries of a growing thirst for alternatives with the asset class rising to prominence in a relatively short period of time.

“Having experienced decades of low growth and limited domestic opportunities, these investors are hungry for investment alternatives, Yamashita said.

“It’s a natural step for Japanese institutions to begin deploying capital to global infrastructure projects, which is a positive development for liquidity and will continue to support the globalisation and maturation of this market.”

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