Japan’s Chikyoren awards domestic equity mandates

The pension fund is adding domestic exposure to its portfolio and Japan’s stock market could face a game-changing year, one manager told AsianInvestor.
Japan’s Chikyoren awards domestic equity mandates

Japan’s Pension Fund Association for Local Government Officials, also known as Chikyoren, has hired Tokyo-based fund houses Nikko Asset Management (Nikko AM) and Sumitomo Mitsui DS Asset Management (SMDS AM) for an active domestic equity mandate.

The mandate will be benchmarked against the Tokyo Stock Price Index (Topix), Chikyoren said in a statement on December 23.

Both Nikko AM and SMDS AM declined to answer questions from AsianInvestor on mandate sizes or how they would assess management of the mandate to outperform the Topix. Chikyoren could not be reached for comments.

Junichi Takayama,
Nikko AM

In December 2022, Junichi Takayama, investment director at Nikko AM, told AsianInvestor that inflation had the potential to break the vicious cycle of deflation and low wages, essentially a “chicken-and-egg” problem for Japan.

Inflation, if accompanied by rising wages, could open a new chapter for Japan, he said, which has suffered from a long period of deflation and economic stagnation.

“Wage hikes will be key to whether the BOJ decides to pivot. The annual wage negotiations take place in spring. The government, business lobby Keidanren and unions are encouraging higher wages, which would clearly be positive for consumption thanks to households’ pent-up demand following the pandemic,” Takayama told AsianInvestor.

Also read: 2023 outlook for Japan’s equity market

One of the main macroeconomic events at play in 2023 is set to be the supply chain constraints that have emerged in recent years.

Takayama expects to see a shift away from globalisation and in the other direction towards reshoring (bringing manufacturing back home), nearshoring (producing goods closer to home) and friend-shoring (deepening supply chains with trusted partners).

“Companies’ increasing focus on ESG and human rights due diligence is also expected to lead them to reorganise their supply chains and bring manufacturing and procurement closer to home," Takayama said. "Attempts by large Japanese companies to realign their supply chains and adapt to new global constraints could inject new life into 'made in Japan' in 2023, especially for manufacturing sectors.” 


The domestic equity mandates marked Chikyoren’s third outsourcing of public investments during 2022. The previous two were for foreign equities and foreign bonds. The values of these mandates were not publicly disclosed either.

In August, Chikyoren hired Japanese Asset Management One, with Schroders as subcontractor, for a foreign equity mandate with the MSCI ACWI index as benchmark, excluding Japanese stocks.

At the same time, Dutch asset manager Robeco was hired to a similar mandate with the MSCI Kokusai index, also known as the MSCI World ex-Japan index, as the benchmark. Both benchmarks are being tracked on a yen-nominated basis, including dividends.

In May, the pension fund awarded six foreign bond mandates to Barings, Resona Bank, J.P. Morgan Asset Management, BlueRay Asset Management, BNY Mellon Investment Management and Asset Management One, respectively.

Chikyoren also outsourced three separate alternative investments in 2022.

In May, overseas private debt mandates were awarded to ICG Alternative Investment and Arcmont Asset Management. Blackrock was also hired for an overseas private debt mandate in January 2022. In February, Tokyu Fudosan’s TLC REIT Management was hired for a domestic real estate mandate.

Spread over three funds, Chikyoren had around ¥27.5 trillion ($212.4 billion) of total assets under management as of September 2022, the end of the second quarter of Chikyoren's fiscal 2022.

Also read: Portfolio value at Japan’s GPIF softens in Q2

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