GPIF’s first step is to target ‘gatekeepers’

The world’s largest pension fund has made public its investment framework, which will see it target gatekeepers and funds of funds, before making co-investments, and ultimately fund investments.

The $1.3 trillion Government Pension Fund of Japan (GPIF) has said its first step in building its alternatives exposure is to hire ‘gatekeepers’ and funds of funds.

Earlier this month the world’s largest pension fund launched its first-ever call for applications for private equity, real estate, and infrastructure managers and said that it will review applications from June 1.

For real estate, GPIF said it prefers managers focused on investing in global and Japanese core real estate funds. GPIF defines core as a product mainly focused on generating a stable income, and excludes products invested mainly in listed funds.

However, GPIF has since made public its investment framework, which details the process the pension fund will follow to build its alternatives allocation.

GPIF commented: “Our first stage begins with three phases, trying to make diversified core global portfolios for this time as an initial phase, before starting co-investments and specific fund investments in specific regions and strategies.”

GPIF will begin by focusing on “Gatekeepers/Fund of Funds” and in particular it will look for domestic investment managers to make discretionary investment mandates, but will favour managers with a good track record of global management in order to scale the partnership.

To support GPIF with its first ever alternatives investment, Towers Watson Investment Services and Russell Investments Japan have been appointed as consultants to carry out due diligence and the evaluation of managers.

GPIF is targeting a 5 percent allocation to alternatives, however as at the end of March 2016, it had only invested about 0.06 percent in alternatives, with ¥1.9 billion ($17 million; €16 million) in private equity, and ¥81.4 billion in infrastructure through co-investments with external institutional investors, the fund said in a report.