CBRE GIP was not the most important of GPIF’s two real estate hires 

The $1.4trn pension fund’s appointment of Asset Management One as gatekeeper underscores the crucial role intermediaries will play matching Japanese capital with Western managers.

The appointment of CBRE Global Investor’s multi-management business by the world’s biggest institutional investor rightly grabbed the headlines last week.

But Japan’s Government Pension Investment Fund’s appointment of Tokyo-based Asset Management One, a unit of Mizuho Financial Group, as a gatekeeper, is the more important as far as global investment managers are concerned. Asset Management One will be overseeing the mandate for the $1.4 trillion investor.

Intermediaries are not uncommon hires for investors, particularly those lacking experienced in-house portfolio and investment specialists. They are common in markets like the US, for example. The concept of ‘gatekeepers’ in Japan, however, takes on a different resonance, as delegates heard at PERE’s annual Tokyo conference this week. They were told how these advisors, in fact, will hold the key to Japan’s long-awaited institutional push into global property markets.

Japanese pension funds will not make calls without prior guidance from their gatekeepers. Why? Legally speaking, they are considered non-professional investors and therefore need to formally appoint licensed asset management firms to manage their investments. GPIF was under the same obligation, though a regulatory change earlier this year gave it permission to invest legally in limited partnerships without a gatekeeper. One gatekeeper called GPIF’s case an exception, at least for now, in terms of the altered regulatory requirements.

Nevertheless, for its earliest real estate outlays, it is notable that Japan’s institutional giant has chosen to hire a gatekeeper anyway. Sources at PERE Tokyo say it will be years before GPIF builds its in-house team and investment expertise to work directly with managers.

Traditional gatekeepers in Japan do the following work: undertake due diligence processes on behalf of their investor; assist in manager selection; prepare presentations to get investment committee approvals; even monitor asset performance. At our event, PERE was told of cases where gatekeepers had contractually agreed a ‘right to vote’ on any investment for their employer.

Some are awarded more discretionary mandates, to choose managers and create customized portfolios. In these cases, they can have discretion to sell assets. Some may even reinvest proceeds.

Western managers have long wanted to unlock Japan’s institutional coffers, given the volume of Japanese capital expected to be invested globally over the coming years. A report by global broker CBRE estimates indirect investment by Japanese institutional investors in overseas real estate will amount to approximately $14 billion over the next three years alone. The Japanese postal giant’s insurance arm Japan Post Insurance, as an example, is aiming to allocate 1.5 percent of its $700 billion in assets under management to alternative investments over the next three years. That is over $10 billion of capital waiting to be deployed.There is no arguing their relevance. Ultimately, however, their powers depend on the size of the investors they serve and the extent to which they want to devolve responsibilities to third parties. Some of the larger and more experienced investors, for instance, have chosen managers themselves before appointing gatekeepers to fulfil their legal obligations.

So there is little wonder why these managers have spent considerable time pondering how to engage the country’s investors once this appetite turns to action.

But those searching for clues from GPIF’s appointment of CBRE GIP might be focusing on the wrong appointment. Understanding how to work with Asset Management One, and other gatekeepers like it, would be time better spent.

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