Experience, knowledge transparency and the right, consistent key people are factors that are important factors selecting asset managers for the Pension Fund of Japanese Corporations (PFJC), which manages several corporate pension plans.
“I seek to understand how the manager works through their willingness to disclose how they work. I don’t care about resumes and CVs; the ability to admit weaknesses is more important," Yoshisuke (Yoshi) Kiguchi, chief investment officer at PFJC, told AsianInvestor.
Kiguchi works with an unusual portfolio construction with around 90% allocated to alternatives. Likewise, the PFJC portfolio is around 90% allocated to overseas investments.
Such a portfolio construction equates to substantially greater reliance on active external managers and their blind pool fund vehicles as compared to portfolios with more public market assets or a larger domestic allocation that could be more easily monitored.
To get a better overview and pick the right asset managers, Kiguchi’s calendar is often fully booked as he adheres to in-person meetings whenever possible.
“I meet many asset managers, and I look for experience, and whether that experience leads to knowledge,” he said.
To Kiguchi, knowledge can only partly be shown through track records because market conditions differ. Since track record does not guarantee future performance, people matter even more at the asset manager he ends up investing with, especially in terms of key people and personalities.
“Self-conviction is an important trait to assess, and I look for people that are honest and reliable. I ask about bad times and how they believe they can beat the market,” Kiguchi said.
PFJC manages capital from a combination of corporate pension funds, as well as endowment funds and one financial institution. The total assets under management was ¥130 billion ($1 billion) as of March 2023.
IN THEIR SHOES
To be able to understand the asset managers’ situation and put himself in their place, Kiguchi also puts in extensive time monitoring financial markets daily. He finds it key to understanding market conditions and being able to select managers.
“I look to have an equal understanding of markets, so I can have an idea of what to think if I was in their shoes. Every excellent investment professional has internal fear of risk. As investors, we need to understand their anxiety. It is not only about performance,” Kiguchi said.
To narrow in on potential managers, he first scans among competitors among the managers PFJC has already invested with to spot potential candidates. Then he looks at the continuity within the managers’ personnel.
“With hedge funds, for instance, it is all about commitment to the fund, and not only the investment professionals. Key investor relations people should stay. The same goes for private equity and real estate investments because they are long-term fund commitments due to the length of the investment cycle,” Kiguchi said.
Among the mandates of this PFJC, Kiguchi has managed two since 2009 – those of Okayama Metal & Machinery Pension Fund and West Japan Metal & Machinery Pension Fund.
Since taking on the reins for these funds in January 2009, Kiguchi achieved an average annualised return of 7.48%. In the fiscal year ending March 31, 2023 (FY2022), the annual return was 1.14%.
To meet new people, he attends conferences not only in Japan but worldwide to build personal relationships as well as gather information and inspiration for new strategies and asset themes.
In June, for instance, Kiguchi had meetings in Europe across Paris, Vienna and Rome with a focus on private debt, hedge funds and private equity. His recent travels also included London, Sao Paolo and Singapore.
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Before heading to the US and Europe, Kiguchi relies on the alternatives research and portfolio advisory firm Aksia, where he makes requests to have specific meetings for specific asset types and strategies.
“Less than 5% of managers I talk to make it to a final meeting of which I propose to the investment committee. They typically approve 50-60%,” Kiguchi said.
He also gains insights and exchanges knowledge about the asset management industry as a member of the Alternative Investment Management Association’s (AIMA) global investor board. There, Kiguchi sits alongside asset owners with much larger assets under management and investment teams.