Japan's GPIF sets first alt assets allocation

The world’s largest pension fund will co-invest with OMERS and DBJ in infrastructure, with a PE alliance next.

Japan’s $1.2 trillion Government Pension Investment Fund has made its first ever concrete allocation target for alternative assets, choosing infrastructure opportunities as a first step, the fund has revealed.

GPIF entered into a co-investment agreement with the Development Bank of Japan and the Ontario Municipal Employees Retirement System (OMERS) to jointly invest in infrastructure assets such as power generation, electricity transmission, gas pipelines and railways in developed countries, according to a GPIF statement.

The fund said it can invest in infrastructure up to $2.7 billion (¥280 billion), which accounts for 0.2 percent of the ¥129 trillion in asset under management as of the end of December 2013.

Tokihiko Shimizu, director general in GPIF’s research department, told Private Equity International that the fund’s first investment will be done this year, as OMERS sources deals and offers investment opportunities.

GPIF and DBJ will have exposure to infrastructure assets sourced by OMERS through a unit trust.

OMERS achieved an 11 percent rate of return through infrastructure investment between 2009 and 2013 on an annualised basis, the statement said, adding: “DBJ and OMERS have extensive infrastructure investment experience.”

Takahiro Mitani, president of GPIF, told PEI in a previous interview that the fund had been studying the operations of peer pension funds that are investing in alternatives. Late last year, a government advisory panel said GPIF should move into new asset classes “including real estate investment trusts, real estate, infrastructure, venture capital, private equity and commodities”.

The fund plans to set up a similar co-investment alliance for private equity investments, Shimizu said.

“We are now talking to institutional investors and pension funds [about a PE alliance],” he said.