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Noritz pension fund on the lookout for 'unique investments'

With its relatively small size, the corporate pension fund works hard to draw attention among external managers for its investment needs, its CIO tells AsianInvestor.
Noritz pension fund on the lookout for 'unique investments'

Being a relatively small asset owner can be a challenge when you have very specific investment preferences for the portfolio.

That is the case for the Japanese Noritz Corporate Pension Fund.

Kiyoshi Iwashina
Noritz Corporate Pension Fund

“Our portfolio size, or AUM, is not so large. Therefore, it is a challenge to establish contact with external managers. Especially for foreign managers, it can be hard to get noticed,” Kiyoshi Iwashina, chief executive officer and chief investment officer at the fund, told AsianInvestor.

Iwashina manages the defined benefits (DB) pension scheme with an annual return target of 3% for domestic employees at Noritz, a Japanese corporation primarily known for producing tankless water heaters for industrial and private home use.

As of March 31, 2023, or the end of the latest fiscal year (FY2022), Noritz Corporate Pension Fund had assets under management (AUM) worth ¥22.7 billion ($170.4 million).

ALSO READ: Japan’s Noritz pension fund sees dark clouds in 2024

Before joining Noritz Pension Fund 10 years ago, Iwashina, now 61 years old, worked on the investment side at a Japanese insurance company, which included a spell overseas in the company’s London office. 

Combined with an educational background in mathematics, his relatively experienced and sophisticated investment industry background means that he prefers specific investment products that might not be among the conventional offerings. Therefore, a lot of work goes into finding the right managers who are able to provide suitable products.

Usually, Iwashina picks up on potentially good managers from lists offered by the Japanese financial institutions licensed with this task by the Japanese government.

The list includes trust banks and some major asset managers that can help the Noritz pension fund find the right investment products.

“Firstly, I need to analyse the track record of each product. Not only the performance — we also analyse risks, drawdowns, and relationships with major financial indices. After that, I conclude whether it is good or bad,” Iwashina said.

AVERAGE AVERSIONS

Iwashina explained that although long-term relationships are universally important in the investment world, it is especially the case in Japan, where longer relationships are very respected.

The Noritz executive uses local financial institutions as agents for sourcing new asset managers or investment products, depending on the product that they each offer. This process is key for Iwashina, who considers himself a bit different from most corporate pension fund managers in Japan.

“Usually, when Japanese financial institutions market financial products to Japanese pensions, they usually choose the products that are not so unique — very average type products,” Iwashina said.

Because the average Japanese corporate pension fund manager does not have a professional background in asset management, most Japanese financial institutions tend to sell them the average type of products, according to Iwashina.

“In my case, most of such average financial products are not so good because they, in my opinion, don’t have an edge in investment management. Of course, they are not necessarily bad, but they are not so sophisticated,” he said.

Iwashina sees this trend as a trait of general Japanese culture, where the average Japanese person does the same things that others do, which is also reflected in asset management. Therefore, if one product is gaining popularity in the Japanese pension fund plans, many other pension plans might invest in the same product.

“I search for unique types of investment products. I don’t do the same products and strategies that others do. I dislike that mentality. I am basically a contrarian type of investor,” Iwashina said.

A PROACTIVE APPROACH

Iwashina uses different methods to find the unique investment products he demands.

A main source of inspiration comes when he attends finance-related conferences or seminars produced by major financial institutions, mainly in Tokyo. He also uses these events to build relationships with foreign asset management companies.

“Building relationships is very helpful, since if asset managers then understand that I am fluent in investment management and financial markets, then they can convey important information to me directly by email or phone. This is a very important point for me,” he said.

Iwashina also talks directly with Japanese financial institutions about specific types of products beyond the standard products that these institutions offer Japanese corporate pension funds.

“Of course, the talks with the institutions do not always lead to the products that I really want, but sometimes the Japanese financial institutions can understand my need for a new investment product from them. So, I try to explain our strategy to the Japanese institutions and overseas asset managers on a daily basis,” he said. 

“Because our AUM is limited, reaching out to institutions and managers is the only way to sort of sell our fund’s investment needs to the financial industry. These efforts mean that we can invest in slightly more complex products for the fund,” he said.

LOOKING FOR VALUE 

When it comes to management fees, Iwashina is also a contrarian in the sense that he does not mind high fees — as long as they are matched by returns.

“Usually, high levels of management fees are not acceptable for many investors, including pension funds like ours. But I am not so concerned about the high-level management fees, because what is important is the net return, after the fee,” Iwashina said.

“So, if the net return is so good, I do not mind the level of the management fee itself. But my opinion may be unique among the investment industry.”

As of FY2022, Noritz Corporation Pension Fund had 14.8% and 15% of the total AUM invested in hedge funds and multi-asset investments, respectively. Fixed income and equities made up 32.3% and 16.4% respectively, while the rest of the AUM was in cash (13%) and the general account (8.5%).

¬ Haymarket Media Limited. All rights reserved.
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