Tokyo Summit: GP ‘chemistry’ key as Japanese LPs look to diversify into infra

Japan Post Insurance will allocate 1.5 percent to alternatives within the next three years as it looks to build an infrastructure portfolio.

Whether it’s by sector, geography or asset life cycle, diversification is the basic attribute Japan Post Insurance is seeking when investing in infrastructure, the company’s head of alternative investments Tadasu Matsuo told Infrastructure Investor’s Tokyo Summit attendees.

‘Diversification’ was a buzzword throughout day one of the conference, as two panels of Japanese institutional investors discussed the key characteristics of infrastructure, such as its low correlation to equities markets and a strong resilience to downsides. They also talked about the asset class’s contribution to portfolio diversification, its stable cash yield and long-term investment horizon.

As for selecting the right fund manager, stable GP management and a healthy track record are the basic criteria, Matsuo said during one of the LP panels. In his view, “face-to-face meetings” are important for Japanese LPs when getting to know potential GP partners and their funds’ competitive advantages. In-person meetings, Matsuo believes, better enable investors to assess a GP’s expertise and capabilities.

“Chemistry” between the investor and the fund manager is also essential, he said.

Speaking about his own organisation, Matsuo said that Japan Post Insurance will be allocating 1.5 percent of its total AUM – 77.2 trillion yen ($718.9 billion; €581.5 billion) – to alternatives, including private equity and infrastructure, under a three-year plan it launched last December.

He expects the insurance company could take as long as 10 years to build its infrastructure portfolio, and is therefore in no hurry to make any commitments this year.