‘Communication with GPs can be a challenge,’ Japan’s AISIN reveals

Japan’s AISIN Employees’ Pension Fund expects fund managers to provide enough information to monitor the blind-pool funds it has invested in, a spokesman for the Japanese LP told Infrastructure Investor.

“Monitoring is extremely important to us, and communication [with GPs] sometimes can be a challenge,” said Hisashi Hatta, advisor at AISIN Employees’ Pension Fund.

Hatta explained that although fund managers’ performance is a “very important” criterion when it comes to committing capital to blind-pool funds, receiving information about underlying assets is also fundamental: “Because we have a fiduciary duty to the beneficiaries of the pension, how a GP achieves [that] performance – including the actions and decisions made on underlying assets – is also important to us.”

He admitted the LP has had problems getting the “necessary information for monitoring” from “a couple of GPs”. “We tailor our approach and try to work with them to communicate more effectively,” he said, without providing further details.

He added that the fund prefers to work with GPs that “maintain consistent communication”, and that are willing to provide more information and cultivate a partnership.

The pension fund is part of the AISIN Seiki group, a Fortune Global 500 company focused on producing car components. It started investing in infrastructure in 2008, making it one of the first Japanese LPs to invest in the asset class, according to Hatta. He added that the pension has target allocations of 7 percent to infrastructure equity and 2 percent to infrastructure debt, an actual allocation of 24 percent to alternative investments, and $2 billion in AUM.

Hatta’s comments on transparency echo remarks made by Japanese institutions during Infrastructure Investor’s Tokyo Summit.

Satoru Tanabe, the head of infrastructure and income investments at Japan’s Pension Fund Association, said that owing to the “limited information” offered by fund managers, the firm was carrying out on-site visits on invested assets. “It is an issue of better accountability, and it helps us to convince the senior management to get approval for the investment,” Tanabe said.

Quest to diversify

Hatta also told Infrastructure Investor that AISIN Employees’ Pension Fund would like to diversify its exposure to the US by investing in areas such as transportation, “but we see more GPs in the energy space than in other sectors in the US.”

He revealed that, despite its focus on core assets, the LP also invests in core-plus and value-add strategies.

“People see core as a safe asset, but we believe that there is still a regulatory risk that is uncontrollable […] Each revenue structure has a different risk, so in order to have a solid portfolio, we diversify our investments.”

Despite this, he added that the LP takes a cautious approach in light of the growing trend of GPs broadening their investment strategies to include new sectors and geographies: “[These new investments are] not necessarily a bad thing, but we want to make sure that such expansion is reasonable and can make use of GPs’ strength and past experience.”