Business / Financial Markets

Investors await naming of CIO at Japan's GPIF, the world's largest pension fund

Bloomberg

The Government Pension Investment Fund will likely announce next week whether its chief investment officer will continue to manage the monolith’s $1.48 trillion in assets.

Hiromichi Mizuno, whose term will end on Monday, captained sweeping changes to the investment strategy of the world’s largest pension fund over the past five years. He became the GPIF’s first CIO in January 2015, overseeing the fund’s shift to stocks from domestic debt, while advocating assets that incorporate environmental, social and governance factors.

Even if the GPIF announces a new investment chief, any market reaction is likely to be limited, according to Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd. The GPIF’s board of governors, which consists of 10 members, decides the fund’s basic portfolio and mid-term strategy.

“The GPIF isn’t an organization in which an individual, like a charismatic manager, operates by himself,” Matsumoto said. “There’s no doubt that Mr. Mizuno has played a key role. However, it’s hard to think that the GPIF’s policies and stance will change suddenly even if he leaves.”

If Mizuno leaves, his replacement should have deep knowledge of global finance, according to Matsumoto. Before joining the GPIF, Mizuno was a partner at Coller Capital Ltd., a London-based private-equity firm.

Whoever holds the CIO position will have to navigate through increasing market turmoil sparked by U.S-China trade tensions, instability in the Middle East and looming signs of a potential global slowdown.

While the GPIF has generated a positive return for four out of five past fiscal years, with its total assets reaching a record high last year, it is still short of recouping all of its record ¥14.8 trillion ($137 billion) loss from the fourth quarter of 2018.

That loss added to public concerns about social security, which was the most important electoral issue for voters in July’s Upper House election. A June report compiled by a government advisory panel said that a couple in their 60s retiring on a pension may need as much as ¥20 million to help cover living expenses.

Hidenori Suezawa, an analyst at SMBC Nikko Securities Inc. in Tokyo, said the GPIF should continue to hold ESG investments to help diversify risk. The fund, which started ESG investing in 2017, has held about ¥3.5 trillion in assets tracking ESG stock indexes as of the end of March.

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