Japan’s ¥162trn (€1.3trn) Government Pension Investment Fund (GPIF) has received regulatory clearance to participate in limited partnership schemes for alternative assets.
Until now, because of statutory limitations, the world’s largest pension fund has only been able to invest in alternative assets through funds of funds (FoFs) and mutual funds.
It has now won approval from the Japanese Cabinet and Japan’s Ministry of Health, Labor and Welfare to participate in limited partnerships.
GPIF had been exploring the use of limited partnerships since 2016 to help it diversify further into alternative asset classes.
The pension fund will now be able to participate as a limited partner in real estate, infrastructure and private equity schemes through general partners.
Speaking with IPE Real Assets in Tokyo, GPIF spokesperson, Naori Honda, said: “We have started to organise ourselves to be able to prepare for LP-style investments in the current financial year [from April].”
“In the past,” said Honda, “we have had legal restrictions preventing us from investing in limited partnership schemes. Those restrictions have now been removed.”
Honda explained that, although the Japanese Cabinet made the necessary legislative changes in the last financial year, GPIF has had to change its own internal rules. The process involved approvals from GPIF’s board and the Minister of Health, Labor and Welfare, Katsunobu Kato.
Honda said GPIF will continue to use its “FoF-gatekeeper” approach in parallel with limited-partnership investments.
GPIF investment guildelines stipulate that it cannot own more than half of a limited partnership.
The pension fund’s medium-term investment plan allows it to increase its allocation to alternative investments to 5%. Honda said that, as at the end of December 2017, alternative investments, including real estate and infrastructure, represented 0.1%.
“We have a long way to go to reach our target,” she added.
GPIF now invests through a wide range of domestic and foreign asset managers.
GPIF president Norihiro Takahashi said in January that GPIF is undertaking due diligence of international real estate and private equity FoF managers.
“You can assume that those mandates are coming,” said Honda.
