The chief investment officer of Japan’s ¥140 trillion ($1.23 trillion) Government Pension Investment Fund says he wants to build relationships with local and global professional investors based on trust. He held up public pension funds in California, Canada and Norway as exemplars of the level of institutional investment excellence to which GPIF is aspiring.
Delivering the keynote address at AsianInvestor’s Japan Institutional Investment Forum in Tokyo yesterday, Hiromichi Mizuno set out his vision for industry collaboration to create a bigger and better domestic market for investment.
“In order to improve confidence in us by the general public, what is most important is that we build a relationship with professionals, and that relationship is based on trust,” he told the audience of asset owners, managers and advisers.
Mizuno noted that GPIF was often talked about simply because of its size as the world’s largest pension fund, regularly being described as a whale in a pond.
“Should we be satisfied with the Japanese market being referred to as a pond? Is it that small? I do not think so,” he said. He urged local and foreign asset owners in the room to work together as investors to improve the sophistication of the domestic market.
“As investors we have to co-operate and hone our skills so that we become better than a pond,” he said. “We should become an ocean in terms of Japanese equities; that is the kind of market we should create. Then GPIF can make contributions as a whale that is swimming in the Sea of Japan.”
Mizuno stressed that the fund wanted to be of service to investors. “Every day we are working hard to make the Japanese market more sophisticated, so we seek your further cooperation and encouragement,” he stated.
Late last year AsianInvestor's panel of judges selected the fund as institutional investor of the year for Japan, in our second ceremony dedicated to awarding the region’s largest and most sophisticated investors.
This was in recognition of an unprecedented revision of GPIF’s asset allocation and governance structure that has taken place over the past 18 months, including the appointment of Mizuno as its first CIO in January 2015.
GPIF was unable to attend our Institutional Excellence Awards ceremony in Singapore last December, so Mizuno accepted the award on stage yesterday. He said: “On behalf of GPIF and all our staff, I would like to take this opportunity to express our sincere gratitude to AsianInvestor for giving us this award for excellence.”
While on one hand he noted it was an honour to receive the award, on the other he said he felt humble and suggested GPIF did not yet deserve such recognition. “We are not there yet. We try to keep working hard and we are really committed to achieving and making what this award really means worthwhile.”
Shortly before he started as CIO in January 2015, noted Mizuno, GPIF announced a new basic portfolio. “Since then we have done rebalancing, and that has drawn much attention from the market,” he said.
“But we don’t feel that we are really worthy of this award yet. I do not think we have reached the level of some of our peers,” he stated, saying that if he was to give leading public pension funds in California, Canada and Norway a score of 10 out of 10, GPIF would get a score of three.
“That is what I feel when I engage in my daily duties,” he said. “Some people say GPIF is a total layman, in which case we score zero. So we hope to get GPIF as an institutional investor up to a score of at least eight out of 10. By doing so we hope confidence in us by the general public will improve.”
Returning to his earlier analogy, Mizuno noted that size was not the only distinctive characteristic of a whale. “They also have very high intellect. That is the kind of whale we have to become.”
He added that GPIF needed to swim beyond the Sea of Japan. “We have a global portfolio. At the moment all the talk about us is [our work] in the Japanese market. So we have to develop before we can be considered to have a global existence [and be talked about in the same breath as global peers].”
AsianInvestor will publish a detailed interview with Mizuno held on the sidelines of our Japan forum in a forthcoming edition of our print magazine.