Foreword: Overview of Fiscal 2018

Summary of Major Initiatives

Promoting Activities Aimed at
Fulfilling Stewardship Responsibilities

GPIF has conducted stewardship activities, suchas strengthening collaboration with Japanese andforeign institutional investors and parties thatsigned the Principles of Responsible Investment(PRI), with the objectives of appropriately fulfilling
its responsibilities to pension beneficiaries, as theirfiduciary, and enhancing medium- to long-term
investment returns.
For details, refer to page 38-46.

S upport for the Task Force on Climate-related Financial Disclosures (TCFD) and participationin Climate Action 100+
Calling for proposals on new business models by passive asset managers
The Business and Asset Owners’ Forum and the Global Asset Owners’ ForumA questionnaire survey on investee companies on stewardship activities by external asset
managers

Promoting ESG Activities

I n order to reduce the negative impac ts ofenvironmental and social issues and improvesustainability of financial market and risk-adjusted
returns, GPIF conducts its stewardship activities
by integrating ESG (environmental, social andgovernance) factors in the investment process not
only in equity investment but also in other asset
classes such as bonds and alternative assets.

For details, refer to page 47-50.

Selection of Global Environmental Stock Indices
Publication of ESG ReportCollaboration with the World Bank Group in green bonds

9Foreword: Overview of Fiscal 2018

Alternative Investments to Gain Momentum
GPIF has steadily been increasing exposure to alternative investments in
expectation of greater portfolio diversification, seeking to improve investment
efficiency and further to ensure the stability of pension finance. GPIF is in
the process of calling for applications from asset managers who will pursue
multi-manager investment strategies in order to build a diversified portfolio
comprised of various investment strategies.
For details, refer to page 26-37.

Selecting external asset managers through the Asset Manager Registration System
In fiscal 2018, GPIF selected an external asset manager for real estate(Global-Core style), in addition to asset managers for infrastructure(Global-Core style) and real estate (Japan-Core style) that were selected
in fiscal 2017. GPIF commenced deployment for/in these mandates.

Enhancing portfolio risk management
Portfolio risk management framework for alternative investments has
been enhanced, following substantial capital deployed by discretionary
asset managers (multi-manager investment strategy) for infrastructure andreal estate in fiscal 2018.

10

Chapter 1

Investment Results in Fiscal 2018

1 Investment Results[1] Rate of investment return / Amount of investment returns, etc.
① Rate of investment return%

The rate of investment return for fiscal 2018 is+ 1.52 %.
(Unit: %)

1Q

3Q

4Q

Total

3.42

–9.06

6.21

1.52

10.0

Domestic
bonds

0.14

–0.79

1.01

1.07

1.43

10.0

Domestic
equities

1.03

5.89

–17.57

7.63

–5.09

5.0

Foreign
bonds

0.56

1.79

–2.74

3.17

2.70

Foreignequities

5.17

7.07

–15.71

13.91

8.12

Short-term
assets

0.00

–0.00

–0.00

0.02

0.02

FILP bonds

0.48

0.48

0.49

0.48

1.93

Quarterly
Cumulative
Quarterly
Cumulative

1.68
1.68

5.13

6.21

5.13
3.42
2.97%
3.42
2.97%

6.21
1.52
1.52
–4.31
–4.31
–9.06

%

1.68

Total
Market Investments

2Q

12.0
%
10.0
12.0
8.0
10.0
6.0
8.0
4.0
6.0
2.0
4.0
0.0
2.0
–2.0
0.0
–4.0
–2.0
–6.0
–4.0
–8.0
–6.0
–10.0
–8.0
–12.0
–10.0
–12.0

Q1

Q2

Q3
–9.06

Q4

1Q

2Q

3Q

4Q

8.12

%

8.12

5.0

1.43

0.0

1.43

2.70

1.93

0.02

2.70

1.93

0.02

0.0
–5.0

1.52
1.52

– 5.09–5.0– 5.09–10.0

Domestic Domestic Foreign Foreign Short-term FILP
Total
assetsbonds–10.0 bonds equities bonds equities(Note 1) Fiscal 2018 runs from April 1, 2018 to March 31, 2019.
Domestic Domestic Foreign Foreign Short-term FILP
Total
(Note 2) The GPIF’s portfolio consists of funds invested in the markets (hereinafter “market investment”
is marked
FILP bonds
bonds that
equities
bondsto market)
equities andassetsbonds(see Note 5), which

are held to maturity and valued at amortized costs.
(Note 3) In this report, returns are calculated as the weighted average of gross market investment returns and FILP bond returns weighted by total amount invested.
The rate of return within each asset class other than FILP bonds is time–weighted.
(Note 4) Alternative asset funds contain a mixture of asset classes, and the investment returns of such funds are allocated to each asset on a pro-rata basis according to
the targeted asset composition ratio in the investment plan at the start of investment of such funds (the same shall apply hereinafter).
(Note 5) FILP bonds are government bonds issued to finance the Fiscal Investment and Loan Program (FILP).

② Amount of investment returns¥billion

20,000Quarterly
Cumulative

The amount of investment returns for fiscal 2018 is
10,000+¥2,379.5 billion

2,622.7
0.

8,037.0

1Q
Total

2Q

2,622.7

3Q

5,414.3 –14,803.8

4Q

Total

9,146.3

2,379.5

61.4–336.5

424.2

446.8

595.9

Domestic
equities

419.9

2,423.0–7,655.6

2,739.4–2,073.2

Foreign
bonds

134.0

441.2

–718.2

840.4

697.5

Foreignequities

2,003.0

2,882.3–6,858.1

5,113.9

3,141.1

Short-term
assets

0.1

–0.1

–0.4

1.5

1.1

FILP bonds

4.3

4.3

4.3

4.3

17.2

Market Investments

Domestic
bonds

2,379.5

5,414.3
44,517-6,766.8–10,000

Interest and dividend income contributed to positive returns, despite
unrealized losses in domestic equities.
(Unit: ¥billion)

9,146.3–14,803.8–20,000

1Q

2Q

3Q

¥billion

5,000

3,141.1
697.5

595.9
0

2,379.5
1.1

17.2–2,073.2–5,000

Domestic Domestic
bonds
equities

Foreignbonds

Foreign Short-term
equities
assets(Note 1) Investment returns are gross of fees.
(Note 2) Due to rounding off, the sum of each item in individual quarters does not necessarily match the total number for the fiscal year.

11

4Q

FILP
bonds

Total

③ Cumulative returns and asset size since fiscal 2001
Cumulative returns from fiscal 2001 to fiscal 2018 are

C
h
a
p
t
e
r

+¥65,820.8 billion

1

and the value of investment assets at the end of fiscal 2018 is¥159,215.4 billion.

Cumulative return¥billion+65,820.8

70,000+63,441.3
60,000+53,360.3+50,733.8

50,000+45,423.9

40,000+35,441.5

30,000+25,220.9

20,000+17,370.3+13,425.8+13,998.6+11,852.5

10,000+11,389.4+4,463.8+1,851.1+2,504.3

0–587.4–10,000+11,689.3–3,040.5

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Asset size

¥billion

180,000
160,000

Market investments

156,383.2 159,215.4

FILP bonds

140,000

126,577.1
119,886.8
122,842.5
117,628.6
116,317.0 113,611.2 120,465.3
114,527.8

120,000

137,476.9 134,747.5

144,903.4

102,871.4

100,000

87,227.8

80,00070,341.1

60,00050,214.3

40,000 38,601.4
20,0000

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018(Note) The balance of FILP bonds increased from fiscal 2001 to fiscal 2007 due to increased underwriting, and decreased since fiscal 2008 due to redemption
on maturity.

12

Investment Results in Fiscal 2018

1 Investment Results④ Investment income
Returns on investment assets are valued at market prices and can be classified into investment income(interest dividend income) and capital gains and losses (realized and unrealized gains or losses due toprice fluctuations). Investment of the pension reserve is intended to deliver stable returns in accordancewith a policy asset mix established from a long-term perspective. Therefore, investment income, which is
generated stably from holdings of investment assets, is important. In particular, while market fluctuations
may cause capital losses in the short term, investment income is relatively immune to such volatility andgenerates a continuous stream of positive return.
The breakdown of investment income shows that investment income from domestic and foreign equities
has been increasing while that from domestic bonds has been decreasing in recent years.
In fiscal 2018, the total amount of investment income is¥3,040.9 billion (rate of return: +1.91%),

and the cumulative amount of investment income for the 18 years since fiscal 2001, when GPIF started
managing pension reserve, is¥33,900.6 billion (rate of return: +1.62%[annual rate]).

Cumulative returns and investment income since fiscal 2001

¥billion

70,00065,820.8

Cumulative returns

63,441.3

60,00050,733.8

50,00053,360.3
45,423.9

40,00035,441.5

30,00028,080.8
25,220.9

20,00017,370.3
13,425.8

11,852.5
10,315.7

10,0006,115.5
4,463.8
2,021.1
537.8 1,189.6
4,474.901,851.1 3,127.0–587.4–3,040.5–10,000

14,602.6
12,509.4
11,689.3

8,116.4

23,005.0

16,636.7

11,389.4

18,610.7
13,998.6

30,859.7

33,900.6

25,547.4

20,751.8

Investment income(cumulative)

2,504.3

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Investment income
Foreign equities¥billion%

Foreign bonds

3,500

2.50

Domestic equities
Domestic bonds

3,250

Investment income

1.91%

3,000
2,750

1.87%

2,500

1.67%

2,250
2,000

1.39%

1.43%
1.30%

1.27%

1,750
1,500

210.6

1,000
500
250
0

13

107.2
69.6 135.7
45.4
77.8
99.2
54.4
64.4
44.7
488.5
439.0
390.5

162.2
192.8
123.9
626.3

247.7
165.3
720.8

301.1

318.3
398.3

1.18%

1,250
750

1.31%

1.79%
308.8

263.7

399.5

338.5

244.1

266.3

1.89%

1.80%

401.4
234.3

1.69%

1.79%

353.1
266.0

323.5
331.1
303.2

360.4

438.1

827.5

1,038.4

1,225.7

1,180.9

1,076.1

2.00
976.1

869.9
771.4

753.4

490.4

517.8

1.50

530.0

320.0

383.8

420.4

324.8

366.6

445.7

210.2
1,255.9

1.75%

1.64%

1.64%
292.4

1.78%

607.5

684.3

628.2

719.8

1.00

782.4

907.0

0.50
968.3

952.4

855.1

672.3

577.9

498.4

438.9

FY2001 FY2002 FY2003 FY2004 FY2015 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

0.00

Investment Results in Fiscal 2018

1 Investment Results(Unit: ¥billion)
FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018Domestic 14,232.9
390.5
bonds
(1.28%) (1.49%)

439.0(1.26%)

488.5(1.03%)

626.3(1.03%)

720.8(1.10%)

827.5(1.12%)

1,038.4(1.21%)

1,225.7(1.41%)

1,255.9(1.51%)

1,180.9(1.52%)

1,076.1(1.50%)

968.3(1.30%)

952.4(1.36%)

855.1(1.51%)

672.3(1.27%)

577.9(1.21%)

498.4(1.12%)

438.9(1.02%)

Domestic
equities

6,140.0(1.58%)

44.7(0.65%)

64.4(0.87%)

99.2(0.83%)

123.9(1.00%)

165.3(0.87%)

210.2(1.10%)

244.1(1.77%)

266.3(2.34%)

234.3(1.59%)

266.0(1.98%)

303.2(2.14%)

324.8(1.85%)

366.6(1.76%)

445.7(1.41%)

607.5(1.99%)

684.3(1.95%)

782.4(1.92%)

907.0(2.35%)

Foreignbonds

6,410.7(3.23%)

54.4(4.04%)

77.8(3.06%)

135.7(3.43%)

192.8(3.33%)

247.7(3.28%)

338.5(3.73%)

399.5(4.13%)

398.3(3.98%)

401.4(3.96%)

353.1(3.75%)

331.1(3.33%)

320.0(2.71%)

383.8(2.74%)

420.4(2.31%)

490.4(2.59%)

517.8(2.63%)

628.2(2.63%)

719.8(2.59%)

Foreignequities

7,101.9(2.20%)

45.4(1.19%)

69.6(1.56%)

107.2(1.81%)

162.2(1.99%)

210.6(1.96%)

263.7(2.09%)

318.3(2.92%)

308.8(3.40%)

301.1(2.27%)

292.4(2.23%)

323.5(2.48%)

360.4(2.42%)

438.1(2.22%)

530.0(1.76%)

771.4(2.48%)

753.4(2.16%)

869.9(2.25%)

976.1(2.33%)

Total

33,900.6(1.62%)

537.8(1.39%)

651.8(1.30%)

831.4(1.18%)

1,106.0(1.27%)

1,347.9(1.31%)

1,640.7(1.43%)

2,000.8(1.67%)

2,199.4(1.87%)

2,193.7(1.79%)

2,093.2(1.80%)

2,034.1(1.79%)

1,973.9(1.64%)

2,141.1(1.69%)

2,253.2(1.64%)

2,542.4(1.89%)

2,533.4(1.75%)

2,778.9(1.78%)

3,040.9(1.91%)

Cumulative

C
h
a
p
t
e
r

1

(Note 1) Due to rounding off, the sum of the figures for each individual fiscal years does not necessarily match the cumulative amount of investment income.
(Note 2) T he figures for domestic bonds include investment income from FILP bonds (including convertible corporate bonds in fiscal 2001), while the total
includes investment income from short-term assets.
(Note 3) T he annual rate of return (cumulative) represents the geometric mean of the rates of return for individual fiscal years (annualized).

⑤ Comparison to MHLW’s investment return target

The average real investment return* isand

3.17 %

2.87 %

for the 18 years since fiscal 2001

for the 13 years since fiscal 2006, GPIF was established as an incorporated administrative agency.

These returns are higher than MHLW ’s investment return target.
* The real investment return is net investment yield on the pension reserve less the nominal wage growth rate, since public pension benefits are indexed to wages
until retirement.

GPIF’s investment performance

Performance

FY2001(Unit: %)FY2002

FY2003

FY2004

FY2005Nominal investment return(After deducting interest
on debts, investment
management fees, etc.)–4.01 –6.69

7.61

2.91

9.57

Nominal rate of increasein wages–0.27 –1.15 –0.27 –0.20 –0.17

0.01 –0.07 –0.26 –4.06

Real investment return–3.75 –5.61

3.51 –4.63 –7.37 12.44 –0.95

7.90

3.11

9.76

FY2006

FY2007

FY2008FY20093.52 –4.69 –7.61

FY20107.88 –0.27

FY2011FY20122.29 10.21

0.68 –0.21

FY2013

FY2014

Last13years Last18years(annualized) (annualized)

FY2015FY2016FY2017FY20188.62 12.24 –3.84

5.82

6.86

1.49

3.10

2.70

0.21

0.13

0.50

0.03

0.41

0.95

–0.06

–0.16

2.51

9.98

8.48 11.14 –4.31

0.99

5.79

6.43

0.54

3.17

2.87

FY2016FY2017FY2018

Yields used in
actuarial valuation

Investment return target assumed in the MHLW’s financial valuation(Unit: %)FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014

Nominal investment
return

4.00

4.00

0.80

0.90

1.60

2.30

2.60

3.00

1.47

1.78

1.92

2.03

2.23

1.34

Nominal rate of increasein wages

2.50

2.50

0.00

0.60

1.30

2.00

2.30

2.70

0.05

3.41

2.66

2.81

2.60

Real investment return

1.46

1.46

0.80

0.30

0.30

0.29

0.29

0.29

1.42 –1.58 –0.72 –0.76 –0.36

FY20151.88 2.17 2.57 3.08
1.61 1.88 2.13 2.42
2.47 2.52 3.56 3.73
1.00 1.63 2.27 2.86 2.76
–0.59 –0.35 –0.99 –0.65
0.34–0.02 –0.39 –0.73 –0.34

Last13years Last18years(annualized) (annualized)

2.18
2.05
2.44
2.23
–0.26
–0.17

2.20
2.11
2.14
1.99
0.05
0.11

14

Investment Results in Fiscal 2018

1 Investment Results⑥ Investment assets and portfolio allocation(Consolidated with GPIF and the Pension Special Account)
Inside:policy asset mix (figures in parentheses
indicate deviation limits)

Outside: at the end of March 2019

Foreign equities

25.53 %
¥41,897.5 billion

Domestic bonds

26.30 %
¥43,162.7 billion

25 %

35 %

( ± 8%)

15
%
±
(

4%)

Foreign bonds( ± 10 % )Short-term assets(Note 5)

7.67 %¥12,587.1 billion

25 %( ± 9%)

16.95 %
¥27,818.7 billion

Domestic equities

23.55 %
¥38,655.6 billion
Market value(¥billion)

Allocation of penPolicy asset mix (B)sion reserve (A)Deviation(A–B)

Domestic bonds

43,162.7

26.30%

35% (±10%)–8.70%

Market investments

42,266.4

25.75%——FILP (Book value)bonds (Market value)

896.3

0.55%

—

—

(957.6)———

Domestic equities

38,655.6

23.55%

25% (±9%)–1.45%

Foreign bonds

27,818.7

16.95%

15% (±4%)1.95%

Foreign equities

41,897.5

25.53%

25% (±8%)0.53%

Short–term assets

12,587.1

7.67%

—

—

Total

164,121.6

100.00%100.00%—(Note 1) The figures above are rounded off, so the sum of each item does not necessarily match the total number.
(Note 2) The amounts in the Market value column include accrued income and accrued expenses.
(Note 3) The book value of FILP bonds is stated at amortized cost plus accrued income.
(Note 4) While the pension reserve as a whole includes reserves managed under a special account as of the end of fiscal 2018 (about ¥4.9 trillion), thisamount is prior to the adjustment for revenues and expenditures and differs from the amount in the final settlement of accounts.
(Note 5) The Policy Asset Mix is as follows: Domestic bonds 35% (±10%), Domestic equities 25% (±9%), Foreign bonds 15% (±4%), Foreign equities 25%(±8%). Based on the current market trends, deviation limits for domestic bonds are flexibly managed as an interim measure. Specifically, shortterm assets can be added to domestic bonds within the range allocated for domestic bonds.
(Note 6) The allocation for alternative investments is 0.26% (up to a maximum of 5% of total portfolio).

⑦ Allocation changes for each asset class due to rebalancing(Unit: ¥billion)

Allocated/withdrawn

15

Domestic bonds

Domestic equities

Foreign bonds

Foreign equities–1,950.8+29.3+3,210.6+96.0(Note 1) Each figure shows the net rebalancing amount.
(Note 2) R edemptions and coupon revenue from the Special
Fund for cash outflow were ¥2,159.4 billion. Coupon
revenue from the Special Fund for FILP bonds was¥17.2 billion.

Investment Results in Fiscal 2018

1 Investment Results⑧ Factor analysis of difference from compound benchmark return
In fiscal 2018, the total rate of returnon all investment assets came toagainst a compoundbenchmark return of

1.52%

1.92%

The average of the annual rate of
return for the 13 years since the GPIF’s
establishment in fiscal 2006 on allinvestment assets was

3.10%

,

representing an
excess rate of return amounting to–0.40 %.

while the compound benchmark
rate of return was

C
h
a
p
t
e
r

The excess rate of return was

1

3.13%

–0.03%,.

.

GPIF breaks down the difference between the total rate of return on all investment assets and the compound benchmark rate of
return into the following three factors to ascertain which factors contribute to the deviation.
(i) Asset allocation factor:

 eviations resulting from differences between the actual asset mix and the policy asset mix
Dused as the basis for calculating the compound benchmark(ii) Individual asset factor:
Deviations resulting from differences between the actual return on each asset class and thecorresponding benchmark rate of return for that class(iii)Other factors (including errors) : Deviations involving both the asset allocation and individual asset factors in addition to
calculation errors(Note) Calculation errors come from differences in the methods used for calculating the rates of return on invested assets as a whole and on the compound benchmark.

In fiscal 2018, the return deviation attributable to asset
allocation was -0.38%. Domestic bonds, which delivereda notably higher return than the compound benchmark
return in the third quarter, were underweighted on averagecompared with the policy asset mix. The return deviation
attributable to individual asset factors was +0.02% as awhole although there are positive and negative deviations
depending on the asset class.

Factor analysis of the difference from the compound benchmark return in fiscal 2018

Rate of return
Return of GPIF Benchmark return
Total
Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
Short-term assets

+1.52
+1.44
–5.09
+2.70
+8.12
+0.02

+1.92
+1.39
–5.04
+2.46
+8.21
+0.02

(Unit: %)Factor analysis of excess rate of return
Excess rate of
return
–0.40
+0.05
–0.05
+0.24
–0.09
0.00

Asset allocation
factor (1)
–0.38
–0.14
–0.09
–0.01
–0.06
–0.08

Individual asset
Other factors
factor (2)(including error)(3)
+0.02
–0.04
+0.02
–0.00
–0.02
+0.00
+0.03
+0.00
–0.02
–0.00
0.00
0.00

(1)+(2)+(3)
–0.40
–0.13
–0.11
+0.02
–0.08
–0.08

(Note) The “compound benchmark return” is expressed in terms of an annualized rate calculated on the basis of the “compound benchmark rate return (monthly basis),”which was obtained by weight-averaging the benchmark rates of return on individual assets according to the shares in the policy asset mix (domestic bonds:
35%; domestic equities: 25%; foreign bonds: 15%; foreign equities: 25%).

Factor analysis of the difference from the compound benchmark return on overall assets (from fiscal 2006 to 2018)Rate of return
Factor analysis of excess rate of return
3.10
4.56
–6.10
–7.57
7.91
–0.25
2.32
10.23
8.64

3.13
4.64
–6.23
–8.45
8.54
–0.02
2.59
9.00
7.74

Excess rate of
return
–0.03
–0.08
+0.13
+0.88
–0.63
–0.23
–0.27
+1.24
+0.90

3.97

3.50

+0.46

+0.47

–0.03

+0.02

+0.46

8.19

9.98

–1.78

–1.99

+0.01

+0.19

–1.78

–3.81
5.86
6.90
1.52

–3.81
6.22
7.26
1.92

+0.00
–0.37
–0.37
–0.40

+0.21
–0.66
–0.36
–0.38

–0.15
+0.33
+0.00
+0.02

–0.06
–0.04
–0.01
–0.04

+0.00
–0.37
–0.37
–0.40

Return of GPIF Benchmark return
FY2006 – FY2018
FY2006
FY2007
FY2008FY2009FY2010FY2011FY2012FY2013
FY2014from Apr.1 to Oct.30
FY2014from Oct.31 to Mar.31, 2015
FY2015FY2016FY2017FY2018(Unit: %)Asset allocation
factor (1)
–0.03
–0.06
+0.17
+0.90
–0.70
–0.26
–0.19
+1.40
+0.92

Individual asset
Other factors
factor (2)(including error)(3)
+0.01
–0.01
–0.00
–0.02
–0.02
–0.02
–0.12
+0.11
+0.08
–0.01
+0.12
–0.09
–0.01
–0.07
+0.03
–0.19
–0.06
+0.04

(1)+(2)+(3)
–0.03
–0.08
+0.13
+0.88
–0.63
–0.23
–0.27
+1.24
+0.90

(Note 1) The annual rate of return of GPIF’s investment and benchmark rate of return represent the geometric mean of the rates of return in individual fiscal years (an annualize rate).
(Note 2) From fiscal 2006 to 2007, analysis was conducted on the difference between the rate of return on market investments (time-weighted rate of return) and the compound benchmark return. From fiscal 2008 onward, analysis has been conducted on the difference between the rate of return on overall invested assets including
FILP bonds (modified total return) and the compound benchmark return.

16

Investment Results in Fiscal 2018

1 Investment Results⑨ Fees and expense¥29.5 billion
0.02%

.

In fiscal 2018, total fees were
The average fee rate on the total
investment assets for fiscal 2018 was.

Total fees decreased by ¥19.3 billion from the previous fiscal year, despite an increase in total assets under management.
The decline was partially attributable to a new performance-based fee structure, since some active asset managers failed
to achieve the target excess return rate (for the performance-based fee structure, refer to page 53).

Management and custodian fees

¥billion%

60.0Management and custodian fees

Management and custodian fees

50.0

0.07

34.3

30.9

0.06

28.8

30.0
20.0

0.08

40.0

38.3

40.0

0.09

48.7

Average fee rate against investment assets

0.03

0.03

29.1

25.8

0.02

24.6

23.1

25.3

22.2

0.02

0.02

0.02

29.5
0.03

0.03

0.02

0.02

0.03

0.05
0.04

0.02

0.02

0.03
0.02

10.0

0.01
0.0

平均残高
（兆円）

FY2006

FY2007

FY2008FY2009

107.7

120.2

119.6

FY2010123.9

FY2011118.1

FY2012112.0

FY2013111.5

FY2014123.9

FY2015131.9

FY2016FY2017FY2018

139.0

137.3

155.7

Management and custodian fees by asset class

Total
Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
Alternative assets(Unit: ¥billion)

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018

30.9
8.5
9.8
4.9
7.7
—

34.3
10.2
9.6
6.3
8.2
—

28.8
10.0
7.0
6.1
5.6
—

25.8
7.1
6.6
6.0
6.1
—

24.6
6.7
6.5
5.6
5.8
—

23.1
6.4
6.2
5.2
5.3
—

22.2
4.7
5.9
5.7
6.0
—

25.3
3.6
7.8
6.8
7.2
—

29.1
3.8
5.7
8.5
11.2
—

38.3
3.8
8.3
9.1
17.0
—

40.0
3.9
8.8
12.5
14.9
0.0

48.7
4.0
10.6
17.2
16.9
0.0

29.5
1.6
7.5
9.2
10.7
0.3

(Note 1) Management and custodian fees are rounded off to the nearest ¥100 million.
(Note 2) The total includes fees and expenses related to short-term assets.
(Note 3) Fees paid to custodians exclude certain expenses that are deducted from the entrusted assets, such as custody fees and attorney fees.

Average fee rate against externally managed assets

Total
Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
Alternative assets
Average balance (¥trillion)(Unit: %)FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018

0.03
0.03
0.05
0.06
0.07
—
107.7

0.03
0.02
0.06
0.07
0.06
—
120.2

0.02
0.02
0.06
0.06
0.06
—
119.6

0.02
0.01
0.05
0.06
0.05
—
123.9

0.02
0.01
0.05
0.06
0.05
—
118.1

0.02
0.01
0.05
0.06
0.04
—
112.0

0.02
0.01
0.04
0.06
0.04
—
111.5

0.02
0.01
0.04
0.05
0.04
—
123.9

0.02
0.01
0.02
0.05
0.05
—
131.9

0.03
0.02
0.03
0.05
0.05
—
139.0

0.03
0.03
0.03
0.07
0.05
—
137.3

0.03
0.03
0.03
0.08
0.04
0.14
155.7

0.02
0.01
0.02
0.04
0.03
0.23
158.9

(Note 1) Total includes in-house investment assets.
(Note 2) The average balance includes in-house investment assets. For FILP funds managed in-house investment, average monthly bookvalues calculated by the amortized cost method are used.

17

0.00

Average fee rate against investment assets

0.10Investment Results in Fiscal 2018

1 Investment Results(Column) Comparison of Investment Cost between GPIF and Major Overseas
Public Pension Funds
GPIF’s average investment cost over the past 13 years is 0.04%, which is lower than that of overseas public pension funds. Average investment costfor overseas public pension funds include the nine institutions below(Note 1).
The reasons for GPIF’s low investment costs are: (1) the majority of GPIF’s holdings are allocated to passive funds, and (2) we constantly strive forour management efficiency.

%
1.20

Time-series data of investment cost

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1

1.00
0.80
0.60
0.40
0.20
0.00
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

GPIF

Major Overseas Public Pension Funds

Maximum

Minimum(Note 1) Canada Pension Plan Investment Board (CPPIB: Canada), The Government Pension Fund Global (GPFG: Norway), California Public Employees’ Retirement
System (CalPERS: the U.S.), California State Teachers’ Retirement System (CalSTRS: the U.S.), Swedish National Pension Fund (AP1, AP2, AP3, AP4: Sweden)
and National Pension Service (NPS: South Korea)(Note 2) Investment cost includes investment management fees, general and administrative expenses, and operational expenses.

18

Investment Results in Fiscal 2018

1 Investment Results[2] Portfolio risk management
The purpose of investment management of a pension
reserve is to contribute to the stable management of a public
pension scheme into the future through stable and efficientmanagement from a long-term perspective solely for the

benefit of the pension beneficiaries. Based on this principle,
GPIF performs portfolio risk management in accordance withthe following basic policies.

(1) GPIF formulates a policy asset mix and appropriately manages it to ensure the achievement of investment return required
for the pension finances with the minimum risk.
(2) GPIF adopts a basic principle for risk management of diversifying investment portfolios across multiple asset classes having
different risk-return profiles, etc.
(3) GPIF performs risk management at each level of the overall asset portfolio, asset class, and external asset manager, etc., aswell as ensuring the achievement of the benchmark rate of returns for each asset class.
(4) GPIF carries out flexible investment based on a proper outlook for the market environment, within a permissible range ofdeviation for the policy asset mix, upon thorough analysis on the current trends marked by the fast-changing economic
and market environment. Meanwhile, GPIF’s investment should not, by any means, be based on a speculative outlook on
the market environment, but rather upon a highly reliable one.
(5) Although there are short-term fluctuations in market prices, GPIF aims to earn investment returns more stably andefficiently by taking advantage of its long-term investment horizon and maintain the liquidity necessary for a pension
payout. In order to assure liquidity, GPIF takes appropriate measures including selling assets in a smooth manner, while
giving consideration to market price formation, securing assets without shortage.
(6) Regarding investment and management of the pension reserve, GPIF constantly strives to strengthen its expertise, clarify thesystem of accountability, and implement thorough compliance with the duty of care and fiduciary duty of a prudent expert.
Risks subject to our portfolio risk management are market risk, liquidity risk, credit risk, and country risk.

19

Market risk

The risk of changes in the value of portfolio assets, including derivatives, due to fluctuations in various
market risk factors such as interest rates, foreign exchange rates, equities, and alternative assets

Liquidity risk

The risk of facing a difficulty in securing necessary funds or incurring losses due to being forced to raise
funds at an interest rate significantly higher than normal, resulting from reasons such as an unexpected
increase in cash outflow (cash management risk) and the risk of incurring losses resulting from theinability to conduct market transactions due to confusion in the market or being forced to conduct
market transactions at prices significantly more disadvantageous than normal (market liquidity risk)

Credit risk

The risk of incurring losses due to reduction or elimination of the value of assets, including derivatives,
due to factors such as deterioration in the financial position of issuers of the portfolio assets, institutions
entrusted with asset management, etc. or counterparties of derivatives transactions

Country risk

The risk of incurring losses in foreign assets due to foreign currency situations or political and economic
conditions of countries relevant to the said assets

Investment Results in Fiscal 2018

1 Investment Results

reserve asset might fall short of the planned reserve asset in
the projected pension finance.
GPIF promotes ESG investment, because it is a method used
for portfolio risk management from a long-term perspective
in terms of reducing the negative impacts of various
environmental, social and governance issues on theportfolio in the long run.
In fiscal 2018, GPIF established the Portfolio Risk Management
policy with the objective of enhancing the portfolio risk
management based on the Internal Control Policy. We
clarified each risk in order to ensure that they do not overlap
and to cover all the risks based on the Portfolio Risk
Management Policy. In addition, we enhanced the rules forcountry risk management. We also strengthened our
information gathering and research functions on domestic
and overseas macroeconomic trends and geopolitical risks,etc. and enhanced our country risk analysis and forwardlooking analysis capabilities. Regarding investment inalternative assets, GPIF strengthened the risk management
system by enhancing the middle office function to adopt a
multilayered check and balance system following the fullscale launch of investment in infrastructure and real estatebased on a discretionary investment mandate (multi-manager
investment strategy). (For details, refer to page 37.)

In accordance with the Portfolio Risk Management policy,
GPIF performs risk monitoring and reporting, to eachcommittee, periodically and as necessar y, based on
domestic and overseas macroeconomic trends andgeopolitical risks, as well as various risk management
indicators including tracking errors, Value at Risk (VaR) andstress tests, and implements appropriate measures that take
into account long-term risk-return profiles.
To better understand and analyze the investment risk of its
entire portfolio, GPIF uses Aladdin® provided by BLACKROCKSOLUTIONS® that adopts a multifactor model to analyze
tracking error, VaR, stress tests based on past market eventsand various hypothesis scenarios, and profit and loss
simulations of changes in equity prices and/or exchange rate
fluctuations, etc. It is important not to focus on a specific risk
indicator but rather to monitor various risk indicators toenhance portfolio risk management.
These risk management indicators are appropriate tomonitor short-term risks. However, considering that longterm perspec tive is crucial to carr y out investment
management of the pension reserve fund safely andefficiently, long-term risk management takes a higher
p r i o r i t y f o r G P I F. W i t h r e s p e c t t o l o n g - t e r m r i s kmanagement, GPIF performs a periodic verification of therisk to the policy asset mix to examine the risk that the

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(Column) Investment Amount by Country
Top 15 countries by amount invested as of the end of March 2019 are as follows.

③United Kingdom (¥trillion)⑫Netherlands (¥trillion)

1.5

3.9

0.6

1.0

⑤Germany (¥trillion)

0.5⑦Canada (¥trillion)
0.5
1.9
1.3

1.3 2.5 1.2

2.4⑬South Korea(¥trillion)
0.1
0.7①Japan (¥trillion)

0.6⑭Belgium⑩Switzerland (¥trillion)(¥trillion)
0.1
0.6

0.0

Bonds

1.3

0.5

1.3

43.2

⑨China (¥trillion)
0.0
1.7
1.7

⑮Mexico
Total

81.8

(¥trillion)
0.1
0.6

Equities

38.7

0.5

②United States (¥trillion)⑧Spain④France (¥trillion)(¥trillion)

0.4

1.8
1.4

2.3

3.9 1.5

12.9⑥Italy (¥trillion)

0.3
2.2
1.9

⑪Australia (¥trillion)
0.3

1.2

0.9

37.6
24.7

(Note 1) Classifications of countries are determined by the countries of issuers for bond investment and by MSCI Country Classification for equity investment.
(Note 2) The figure for China excludes that for Hong Kong.

20

Investment Results in Fiscal 2018

1 Investment Results

Asset Allocation, Tracking Errors and VaR
Changes in asset allocation during fiscal 2018 stayed within the permissible range throughout the fiscal year.
The estimated tracking error *1 of the entire pension reserve was stable throughout the fiscal year, without major changes.
The VaR *2 of the overall pension reserve mostly leveled off throughout the fiscal year.
* 1 Tracking error measures the standard deviation of the difference (excess rate of return) between the benchmark rate of return and the rate of return of aninvestment portfolio.
* 2 VaR indicates the largest loss likely to be suffered on an investment portfolio assuming a certain holding period with a given probability (confidence level).

Domestic bonds

%
55.0
%
55.0
45.0
45.0
35.0
35.0
25.0
25.0
15.0
15.0

%
25.0
20.0

Upper deviation limit
Actual allocation(Domestic bonds + Short-term assets)
Actual allocation(Domestic bonds + Short-term assets)

33.97%
35.00%

Policy asset mix
Lower deviation limit

Jul

Aug

Mar

Jul

Aug

Apr

May

Jun

Sep

Jan

Feb

Mar

Sep

Oct

Jan

Feb

Mar

Nov

Dec

10.0
5.0

26.30%

Actual allocation
Oct
Nov
Dec
(Domestic
bonds)

5.0

Domestic equities

%
35.0
40.0

Upper deviation limit

30.0
35.0

Upper deviation limit

Upper deviation limit

Actual allocation

25.00%

Actual allocation

25.00%
23.55%

20.0
25.0

15.00%
16.95%

Actual allocation

15.00%

Lower deviation limit

Lower deviation limit

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Foreign equities
Foreign equities

%
35.0
40.0

Upper deviation limit

30.0
35.0

Upper deviation limit

25.0
30.0

16.95%

Actual allocation

Policymix limit
Upper asset
deviation%
40.0

Domestic equities

Policy asset mix

Foreign bonds

Policy asset mix

15.0
10.0

26.30%
33.97%

Actual allocation(Domestic bonds)

Lower deviation limit
Mar
Apr
May
Jun

20.0
15.0

35.00%

Policy asset mix

%
40.0

25.0
30.0

25.0

Domestic bonds

Upper deviation limit

Foreign bonds%
Asset allocation

Policy asset mix

20.0
25.0

Policy asset mix

15.0
20.0

Lower deviation limit

10.0
15.0

Lower deviation limit
Mar
Apr
May
Jun

Actual allocation

25.53%

Actual allocation

25.53%
25.00%

Policy asset mix

15.0
20.0
10.0
15.0

23.55%

Lower deviation limit

LowerApr
deviation
Mar
Maylimit Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

25.00%

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

10.0
10.0 1) Asset allocation is calculated including reserves managed in the Pension Special Account.
(Note
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
(Note 2) The permissible range of deviation is ± 10% for domestic bonds, ± 9% for domestic equities, ± 4% for foreign bonds, and ± 8% for foreign equities.
Based on the current market trends, deviation limits for domestic bonds are flexibly managed as an interim measure. Specifically, short-term assets can be added
to domestic bonds within the range allocated for domestic bonds.

Estimated tracking error and VaR of overall pension reserve
Estimated tracking error

%
1.0

0.5

0.0

Apr

May

Jun

Jul

Aug

Sep

Nov

Confidence level: 84%

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

(Note) VaR is calculated using the delta method over a one-year holding period and two-year observation period.

21

Dec

Jan

Feb

Mar

VaR

Risk amount

%
16
14
12
10
8
6
4
2
0

Oct

Dec

Confidence level: 95%

Jan

Feb

Mar

Investment Results in Fiscal 2018

2 Status of Investment in Each Asset Class

2 Status of Investment in Each Asset Class[1] Domestic bonds

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① Excess rate of return
Concerning domestic bond investment (market investment),

selection in the government bond sector. In passive

the excess rate of return over the benchmark was +0.05%

investment, the return was comparable with the benchmark.

(+0.11% for active investment and +0.03% for passive

For overall domestic bond investment, the rate of return wasinvestment). In active investment, the return outperformedin line with the benchmark.

1

the benchmark due to the positive contributions of security② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (+0.05%) on domestic bond investment (market investment) by factor is as follows: fundfactors*1: +0.05%; benchmark factors*2: +0.00%; other factors*3: –0.00%.

(Unit: %)Time–weighted rateof return (1)Benchmark(2)

Excess rate of return(1)–(2)Fund factors

Benchmark factors

Other factors

1.43

1.38

+0.05

+0.05

+0.00

–0.00

The excess rate of return was positive mainly because the rate of return on active investment using NOMURA-BPI plus InflationLinked bonds as the manager benchmark was higher than the rate of return of the manager benchmark (a fund factor).
Factor analysis by manager benchmarks, etc.

(Unit: %)Fund factors

+0.00

+0.01

+0.01

+0.02

Inflationlinked bonds(active)+0.00

Benchmark factors

+0.06

+0.22

–0.18

+0.08

–0.18

NOMURA-BPI(excluding ABS)
(passive)

NOMURA-BPI
government bonds(passive)

NOMURA-BPI/
GPIF Customized(passive)

NOMURA-BPI plus
Infration-Linked bonds(active)

Alternative(active)

Total

–0.00

+0.05

+0.00

+0.00

*1 Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks. They are calculated taking into
consideration the market total average balance of each fund. The manager benchmark for inflation–indexed domestic–bond funds is calculated using NOMURA–
Inflation-Linked bonds (with the principal repayment guaranteed).
*2 Benchmark factors refer to those resulting from differences in the rates of return between manager benchmarks and the benchmark (a compound index consisting of
NOMURA–BPI [excluding ABS], NOMURA–BPI government bonds, NOMURA–BPI/GPIF Customized, NOMURA–Inflation-Linked bonds [with the principal repayment
guaranteed] and NOMURA-BPI plus Inflation-Linked bonds [weighted average according to each asset type’s share of the investment amount]). They are calculated
taking into consideration the market total average balance of each fund.
*3 Other factors refer to calculation errors and such.

22

Investment Results in Fiscal 2018

2 Status of Investment in Each Asset Class[2] Foreign bonds① Excess rate of return
The excess rate of return over the benchmark was +0.24%

the market value composition of USD bonds was overweight(+0.89% for active investment and -0.16% for passive

relative to the benchmark. In passive investment, the excess

investment). In active investment, the excess return was

return was negative mainly because the market value

positive mainly because the market value composition ofcomposition of EUR bonds was overweight relative to the

EUR bonds was underweight relative to the benchmark andbenchmark.

② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (+0.24%) on foreign bond investment by factor is as follows: fund factors*1: -0.13%;
benchmark factors*2: +0.40%; other factors*3: –0.04%.

(Unit: %)Time-weighted rateof return (1)Benchmark(2)

Excess rate of return(1)–(2)Fund factors

Benchmark factors

Other factors

2.70

2.46

+0.24

–0.13

+0.40

–0.04

The positive excess rate of return reflected the outperformance of the manager benchmarks for global and the U.S. aggregate
investments relative to the benchmark for foreign bonds (a benchmark factor).
Factor analysis by manager benchmarks, etc.

(Unit: %)WGBI
WGBI others U.S. government U.S. government U.S. government Europe government Europe government
JPY hedged (passive)(passive)(passive)(passive)
JPY hedged(passive) 1-3years (passive)(passive)

Fund factors

+0.07

–0.00

–0.01

–0.00

+0.00

+0.01

–0.00

Benchmark factors

0.00

+0.00

+0.06

+0.02

+0.07

–0.36

+0.05


Global aggregate U.S. aggregate Europe aggregate Inflation-linked U.S. high-yield Europe high-yield Emerging U.S.
(active)(active)(active)(active)(active)(active)dollar (active)(Unit: %)Emerging local
currency (active)

Alternative(active)

Total

Fund factors

–0.17

+0.01

–0.01

+0.00

–0.00

+0.00

–0.01

–0.00

–0.01

–0.13

Benchmark factors

+0.42

+0.24

–0.11

–0.00

+0.08

–0.04

+0.02

–0.06

0.00

+0.40

* Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks. They are calculated taking into
consideration the market total average balance of each fund.
1*2 Benchmark factors refer to those resulting from differences in rates of return between manager benchmarks and the benchmark (FTSE World Government Bond
Index [not incl. JPY, no hedge/JPY basis]). They are calculated taking into consideration the balance of the average market capitalization of each fund.
*3 Other factors refer to calculation errors and such.

23

Investment Results in Fiscal 2018

2 Status of Investment in Each Asset Class(3) Domestic equities① Excess rate of return
The excess rate of return over the benchmark was -0.05%

the underperformance relative to the benchmark. In passive(-1.62% for active investment and +0.13% for passive

investment, the excess return was positive reflecting theinvestment). In active investment, security selection in

outperformance of the benchmarks such as S&P GIVI Japanchemicals and land transportation sectors contributed torelative to TOPIX.

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② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (–0.05%) on overall domestic equity investment by factor is as follows: fund factors*1:–0.15%; benchmark factors*2: +0.13%; other factors*3: –0.03%.			

( Uni t: %)Time-weighted
rate of return (1)Benchmark(2)

Excess rate of return(1)–(2)Fund factors

Benchmarkfactors

Other factors

–5.09

–5.04

–0.05

–0.15

+0.13

–0.03

The negative excess rate of return reflected the underperformance of the returns of the individual funds of active investment(TOPIX and RUSSEL/NOMURA Large Cap Value) relative to the manager benchmarks (a fund factor).
Factor analysis by manager benchmarks, etc.

(Unit: %)RUSSELL/
TOPIX JPX Nikkei 400 NOMURA MSCI Japan
Standard
Prime(passive)(passive)(passive)(passive)

MSCI JapanESG SelectLeaders(passive)

S&P/JPXMSCI Japan
Empowering FTSE Blossom Carbon
Women Japan(passive) Efficient(passive)(passive)

S&P GIVI NOMURA
Japan
RAFI
(passive) (passive)

Fund factors

–0.01

–0.00

+0.00

–0.00

–0.00

–0.00

–0.00

+0.00

+0.00

–0.00

Benchmark factors

0.00

+0.04

+0.01

+0.01

+0.04

+0.02

–0.01

+0.00

+0.06

–0.02



(Unit: %)TOPIX(active)

RUSSELL/
RUSSELL/
RUSSELL/
MSCI JapanNOMURANOMURANOMURA
Small
Large Cap Value Small Cap Small Cap Growth(active)(active)(active)(active)

Alternative(active)

Total

Fund factors

–0.07

–0.06

+0.01

+0.01

–0.03

+0.00

–0.15

Benchmark factors

0.00

+0.03

–0.01

–0.01

–0.01

0.00

+0.13

*1 Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks. They are calculated taking into consideration
the market total average balance of each fund.
*2 Benchmark factors refer to those resulting from differences in rates of return between manager benchmarks and the benchmark (TOPIX [dividends included]). They arecalculated taking into consideration the market total average balance of each fund.
*3 Other factors refer to calculation errors and such.

24

Investment Results in Fiscal 2018

2 Status of Investment in Each Asset Class(4) Foreign equities① Excess rate of return
The excess rate of return over the benchmark was -0.09%

sector, and other factors, in the developed-country markets.

(+0.85% for active investment and -0.09% for passive

In the emerging-country markets, the portfolio being

investment). In active investment, the return outperformed

overweight in the energy sector in terms of the market value

the benchmark because of the positive contributions of thecomposition, security selection in the consumer durables

portfolio being underweight in the bank sector in terms ofand apparel sector contributed positively, and other factors.

the market value composition relative to the benchmark,In passive investment, the return was in line with thesecurity selection in the healthcare equipment and services

benchmark.

② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (-0.09%) on foreign equity investment by factor is as follows: fund factors*1:-0.16%;
benchmark factors*2: +0.11%; other factors*3: –0.04%.

( Unit: % )Time-weighted rateof return (1)Benchmark(2)

Excess rate of return(1)–(2)Fund factors

Benchmark factors

Other factors

8.12

8.21

–0.09

–0.16

+0.11

–0.04

The underperformance of active investment in developed-country markets and passive investment in ACWI relative to the
manager benchmarks (a fund factor) made negative contributions.
Factor analysis by investment styles
ACWI(passive)(Unit: %)North America Europe&
Middle East
(passive)(passive)

Pacific(passive)

Emerging S&P Carbon Developed(passive)(active)(passive)

Emerging Alternative(active)(active)

Total

Fund factors

–0.07

–0.00

–0.00

–0.00

–0.00

–0.01

–0.09

+0.01

+0.00

–0.16

Benchmark factors

–0.01

–0.01

–0.01

+0.01

–0.03

–0.00

+0.25

–0.10

–0.00

+0.11

*1 Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks. They are calculated taking into consideration
the market total average balance of each fund.
*2 Benchmark factors refer to those resulting from differences in rates of return between manager benchmarks and the benchmark (MSCI ACWI [not incl. JPY, JPY basis, incl.
dividends, after taking into account our dividend tax factors]). They are calculated taking into consideration the market total average balance of each fund.
*3 Other factors refer to calculation errors and such.

25

Investment Results in Fiscal 2018

3 Investment in Alternative Assets

3 Investment in Alternative Assets[1] Overview

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① Investment purpose
Alternative assets have different risk-return profiles fromtraditional assets such as listed equities and bonds, and areless affected by price volatility in the public market, etc.
Considering these profiles, the inclusion of alternative assets
in GPIF’s portfolio is expected to improve the investment
efficiency and contribute to the stability of pension finance.
In addition, as a long-term investor, GPIF can expect apremium by taking a liquidity risk for investments inalternative assets.
Pension funds in other countries have been promoting
diversification by investing in alternative assets for the
aforementioned characteristics and effects. Prior to starting
investment in alternative assets, GPIF carried out careful

examinations in commissioned research projects. In
particular, the research conducted in fiscal 2012 reported
that the inclusion of alternative investments is expected
to realize investment premium for liquidity and improvethe efficiency of investment through diversification. By
taking into account the results of such research projects,
GPIF has increased investments in alternative assets since
fiscal 2017. The current Medium-term Plan (from fiscal 2015
to fiscal 2019) approved by the Minister of Health, Labourand Welfare, permits investments in alternative assets(infrastructure, private equity and real estate) up to 5% of thetotal portfolio.

1

Alternative Assets
Infrastructure

Private equity

Real estate② Investment history
Based on the results of the above-mentioned commissioned
research projects, GPIF has been investing in alternative
assets through a co-investment platform with institutional
investors since 2013 (in infrastructure since fiscal 2013 and in
private equity since fiscal 2015).
In fiscal 2017, GPIF started calling for applications from asset
managers for alternative assets through the Asset Manager
Registration System and went through the screening process
for external asset managers for executing customized multimanager strategies* for GPIF based on a discretionary
investment management agreement.
GPIF has worked continuously to develop the organization
for investing in alternative assets by various measures,such as by establishing a specialized unit (Private Market

FY
2013

* M ulti-manager strategy is an investment approach of selecting multiple
funds and an individual asset manager who invests in those funds. GPIF
invests in a fund-of-funds set up by asset managers who employ a multimanager strategy. GPIF gives discretion to the appointed external asset
managers to make all investment decisions.

●Alternative Investments includedin Policy Asset Mix for Medium-term Plan (Apr. 2015)●Appointment of external advisors for implementation (Feb. 2017)●Portfolio risk management framework formation (Mar. 2017）●Research of alternative
investment schemes (Mar. 2013)

FY
2012

Investment Department), employing experts, examining
investment strategy by external advisors (since fiscal 2015)
and developing a risk management framework. Considering
the individuality of the investment performance and the low
liquidity of alternative assets, risk management at the timeof investment evaluation and after execution of investment
is an important issue. GPIF will strive continually to enhance
the framework for investing in alternative assets, including
risk management.

FY
2014

●Infrastructure co-investment programwith DBJ and OMERS (Feb. 2014)

FY
2015

FY
2016

●Emerging Markets PE co-investment
program with IFC (Jun. 2015)●Appointment of external advisors forinvestment strategy planning (Oct. 2015)

FY
2017

FY
2018

●Discretionary investment
mandate for real estate(Global-Core) (Sep. 2018)●Call for applications of Asset Managers(Apr. 2017)●Discretionary investment mandate
for real estate (Japan-Core) (Dec. 2017)●Discretionary investment mandates
for infrastructure (Global-Core) (Jan. 2018)26

Investment Results in Fiscal 2018

3 Investment in Alternative Assets③ Activities in fiscal 2018
A. Call for application, selection of Gatekeepers and Fund of Funds managers
Following on from last year, GPIF called for applications fromexternal asset managers in alternative assets by utilizing theAsset Manager Registration System and went through thescreening process to select external asset managers that
execute customized multi-manager strategies for GPIF.

To select asset managers, a GPIF team conducts several
rounds of screening, including documents check, interviews,
and on-site visits with external advisors to carefully examine
the capabilities, investment strategies, investment trackrecord, and risk management system, etc. of the managers.

(Example) Infrastructure investment scheme
discretionary
investment
managementagreement

GPIF
Allocate capital basedon investment decision by asset managers

investment

Asset Managers

Gatekeeper

investment
management

Fund of Funds

Selected by
GPIF to execute
multi-manager strategy

Fund of Funds
Managerdiversified through multiple funds

Infra Fund A

Infra Fund B

investment

investment

Infra Asset A

Infra Asset B

Infra Asset C

The amount of capital deployed by appointed managers has
increased, and the total value of GPIF’s investment inalternative assets as of the end of March 2019 is ¥432.7 billion(0.26% of the total value of the pension reserve fund).
Investments are conducted based on a discretionary
investment management agreement. Appointed asset
managers invest in funds in accordance with the pre-agreed
guidelines that define investment objectives, strategies andcertain restrictions, etc.
After the start of investment, GPIF receives a periodic report on
the status of portfolio assets and monitors the performanceand risks. In addition, GPIF conducts annual comprehensive
evaluation of external asset managers, and properly manages
investment by confirming that their fund management teamcomposition has not changed and by monitoring the progressof their investment plans.

(Note) Investment in private equity and real estate will be
executed based on similar investment scheme.

Infra Asset D

Total value of alternative assets up until fiscal 2018¥billion

500

432.7

Real estate (Discretionary investment)

400

Infrastructure (Discretionary investment)

124.9

Private equity (In-house)

300

Infrastructure (In-house)

213.0
200

83.3

100

0

1.9

0.2

5.5

2014/3

2015/3

100.6

8.1
50.0
8.2

148.8
14.3

4.2

81.4

96.4

2016/32017/3

146.7

144.8

2018/3

2019/3

B. Development in preparation for investment in limited partnerships (LPs)
By revising Ordinance for Enforcement of the GPIF Act in
September 2017, interests in limited partnerships (LPs) as
limited partners were added to the securities in which GPIF
may invest. The expected benefits of investing in LPs include
faster access to information on investees, improvementof net returns, and enhancing risk management throughsimplified investment scheme with fewer intermediaries
involved between investors and investees. Thus, investment

27

in LPs has been generally adopted by institutional investors
including pension funds in other countries to invest inalternative assets. Following the revision of the Ordinance,
GPIF started to develop a framework including staff plan, etc.
to launch investment in LPs from fiscal 2017. In fiscal 2018,
GPIF continued to facilitate an implementation plan basedon the framework.

Investment Results in Fiscal 2018

3 Investment in Alternative Assets[2] Infrastructure① Overview
Infrastructure investment is defined as investment in infrastructure such as power generation facilities, electricity transmission
systems, gas pipelines or railways. Infrastructure investment is expected to generate stable revenue over the long term, forexample, from usage fee. Therefore, investing in infrastructure funds has become an important strategy for pension funds inother countries.
Currently, GPIF mainly focuses on Core infrastructure, whichis essential for social and economic activities under a wellestablished regulatory environment by the authorities and thatcan be expected to generate stable usage fees, etc. based onlong-term contracts. Investments in infrastructure assets will be
generally held for a long time, that is, for more than 10 years. The
investments in infrastructure assets will be eventually recovered
through the sale of infrastructure assets to other investors andother means.

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② GPIF’s investment
A. Investment approach
GPIF aims to achieve stable mainly returns from investment income in a timely and efficient manner, in consideration of various
market conditions with the focus on diversified Core infrastructure assets.
B. Investment objectives and scheme
GPIF will mainly invest in equity stakes of operational infrastructure assets and infrastructure debt backed by the income stream
from operating infrastructure assets.
(i) In-house investment in a unit trust
Based on the co–investment agreement with the Ontario Municipal Employees Retirement System (OMERS), a Canadian public
pension fund with an extensive track record in infrastructure investment, and the Development Bank of Japan Inc. (DBJ), GPIF has
invested in a unit trust that targets operational infrastructure assets in developed countries since February 2014.
(ii) Discretionary investment
In fiscal 2018, GPIF committed to the following funds, and the funds constructed diversified investment portfolios focused oncore infrastructure assets.
Asset manager name

Investment style

Start of investment

Gatekeeper: Sumitomo Mitsui Asset Management Company, Limited
Fund of Funds Manager: StepStone Infrastructure & Real Assets

Global-Core

January 2018

Gatekeeper: Nomura Asset Management Co., Ltd.
Fund of Funds Manager: Pantheon

Global-Core

February 2018

Global infrastructure
mandate focusing
mainly on
opportunities inJapanMarch 2018

Gatekeeper and Fund of Funds Manager: DBJ Asset Management
Co., Ltd.

28

Investment Results in Fiscal 2018

3 Investment in Alternative Assets

C. Investment status
The total value of GPIF’s infrastructure investment as of thegenerated mainly from its diversified core infrastructure

end of March 2019 was ¥293.5 billion.

portfolio. Internal rate of return (IRR) from the foreign

The breakdown of portfolio by country shows the UK with

infrastructure investment stood at 1.76% in USD terms, andthe largest share at 45%, followed by Sweden and the U.S.

IRR from the domestic infrastructure investment stood atboth at 11%. As for the breakdown of the portfolio by

2.78% in JPY terms since its inception in February 2014. The

infrastructure assets sector, the largest share went to port at

total dividend received during the previous fiscal year was

19%, followed by airport at 18% and water supply and¥1.3 billion.

sewerage at 16%. GPIF expects stable revenue to be

Value by country

Japan

Value by asset type
Others 6%

3%

Communication 3%

OthersFinland8%

3%

Renewable Energy

Port

6%

19%

Spain

Energy

9%

9%

UK

45%

Australia

10%

Airport9%
Sweden11%

18%

Gas/Oil Pipeline

U.S.

11%

Electricity Supply Water Supply
and Distribution and Sewerage

13%

16%

【Infrastructure investment case 1】
Wind power generation facilities —Portugal—
GPIF has invested in a major wind power operating company in Portugal through an infrastructure fund that mainly
invests in infrastructure assets in Europe. The investee company operates the second-largest portfolio of 27 wind power
generating facilities in Portugal with a total power-generating capacity of 1,082 MW. The company earns stable revenue
on a long-term basis by selling the electricity generated under the feed-in tariff framework.

With the permission of Finerge

29Investment Results in Fiscal 2018

3 Investment in Alternative Assets【Infrastructure investment case 2】
Telecommunications tower operating company —France—
GPIF has invested in the largest independent telecommunications tower operating company through an infrastructure
fund that mainly invests in infrastructure assets in OECD countries. The company owns approximately 10,000
telecommunications towers including wireless communications towers and roof-mounted communications towers, andoperates the communication infrastructure necessary for people’s daily live in collaboration with major telecommunication
carriers to meet the growing demand for high-speed data transmission across France.

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【Infrastructure investment case 3】
Solar power generating facility —Japan—
GPIF has invested in a fund that owns a large solar power generating facility (mega-solar plant) in Japan that has a trackrecord of stable operation of more than over five years. The facility earns stable revenue on a long-term basis by selling theelectricity generated under the feed-in tariff framework.
The plant’s premises are home to one of the national endangered species of fauna and flora in Japan. The facility securesapprox. 10,000m2 of habitat conservation area for the consideration to the species.

30

Investment Results in Fiscal 2018

3 Investment in Alternative Assets[3] Private equity① Overview
In private equity, GPIF invests primarily in funds with focus on

growth and expansion of companies), Venture capital funds

equities of private companies (private equity [PE] funds). PE(investing in start-up and early stage companies, etc. forfunds generally seek investment opportunities in companies

growth potential), Turnaround funds (seeking opportunities

at various development stages while diversifying investment

to turn around companies facing financial challenges throughtiming. Types of PE funds include Buyout funds (seeking tobalance sheet restructuring, etc.), and Private debt funds

create enterprise value of investee companies by improving(investing in debt instruments of private companies). GPIF

post-investment management practices and corporate

makes diversified investments in PE funds of these types.

governance), Growth equity funds (providing capital for② GPIF’s investments
A. Investment approach
GPIF makes diversified investment primarily in equities of private companies at various stages of corporate development, suchas start-up, growth, expansion, and turnaround, with the aim of acquiring relatively higher investment returns driven mainly byenterprise value creation, and contributing to the improvement of GPIF’s overall portfolio returns.
B. Investment objectives and scheme
GPIF will invest in equities (private equity [PE]) and debts (private debts) of private companies.
(i) In–house investment in a unit trust
Based on the co-investment agreement with DBJ and the International Finance Corporation (IFC), a member of the World Bank
Group, GPIF has held a unit trust that invests in PE of consumer-related companies, etc. in emerging markets since June 2015.
The objective is to gain investment returns from the growth of the global economy in a well-balanced manner by adjusting
the bias toward particular sectors in emerging markets public equity and investing in the strong potential for growth fromfavorable demographic shifts and economic developments down the road, such as consumer-related companies.
(ii) Discretionary investment
In fiscal 2017, GPIF started the process of selecting external asset managers under a discretionary investment managementagreement (multi-manager investment strategy) through the Asset Manager Registration System.

31

Investment Results in Fiscal 2018

3 Investment in Alternative Assets

C. Investment status
The total value of GPIF’s private equity investment as of theend of March 2019 was ¥14.3 billion. The return profile ofprivate equity investment generally follows a J-curve pattern(funds experience negative returns for the first several years
due to cash outflows during the initial phase of building
an investment portfolio). However, in the 45 months since
GPIF started investment in the unit trust, the value of theinvestment portfolio has steadily increased and the portfolio
has achieved positive returns from investment in someinvestee companies. As a result, as of the end of March 2019,
GPIF’s private equity investment recorded an internal rateof return (IRR) of 3.43% in USD since its inception, (an IRR of-5.85% in USD as of the end of March 2018).
Looking at the breakdown of investee companies bycountry/region and by sector, the investment portfolio isdiversified into various countries and growth sectors inemerging countries as expected. For the next step, GPIF plans
to expand its diversified investment portfolio by investing
primarily in developed countries through a discretionary
investment management agreement (multi-manager
investment strategy).

Value by country/region
Latin America 4%

Others 0%

Materials 1%

2%

Other Asia

Financials

EuropeConsumer
Discretionary

9%

Communication
Services

22%

9%

10%

1

Value by sector
Energy 1%

North America

7%

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China

Industrials

41%

10%

India

11%

Consumer
Staples

Information
Technology

Africa

15%

25%

17%
Health Care

16%[4] Real estate① Overview
GPIF’s real estate investment focuses on real estate funds
that hold properties such as offices, retails, multi-family
and logistics.
GPIF implements “core-style” investment strategy, whichis expected to generate continuous and stable rental
income from tenants, and this strategy has been adopted
as the major investment strategy by pension funds in othercountries. In the meantime, it is important to diversify thetiming of investment and the type of investment products,
consideration of the fact that the real estate market has
cycles (prices fluctuate according to supply and demand andthe financial market, etc.) and each investment amount/units
tends to be relatively large. At the same time, it is necessary
to engage asset managers and/or property managers, etc. tosustain asset value over the long term.

② GPIF’s investments
A. Investment approach
GPIF aims to earn stable returns based primarily on income by diversified investment with the focus on core-style real estate funds
in a timely and efficient manner by giving consideration to the market circumstances.
B. Investment objectives and scheme
GPIF will mainly invest in private real estate equities and debt backed by the income stream from such real estate assets.
(i) Discretionary investment
In fiscal 2018, GPIF selected an external investment manager for a foreign real estate mandate. In addition to the domestic
funds investment started in fiscal 2017, GPIF has been building a diversified investment portfolio focused on its core-styleinvestment strategy.
Asset manager name

Investment style

Start of investment

Gatekeeper and Fund of Funds Manager: Mitsubishi UFJ Trustand Banking Corporation

Japan-Core

December 2017

Gatekeeper: Asset Management One Co., Ltd.
Fund of Funds Manager: CBRE Global Investment Partners Limited

Global-Core

September 201832

Investment Results in Fiscal 2018

3 Investment in Alternative Assets

C. Investment status
The total value of real estate investment as of the end of

GPIF’s domestic real estate investment has recorded an IRR

March 2019 was ¥124.9 billion.

of 2.30% since its inception in December 2017. The total

As for the breakdown of domestic real estate investment

dividend received during fiscal 2018 was ¥0.3 billion. We

portfolio by property type, logistics accounted for the largest

will continue investing in real estate funds, while paying

share at 31% of the total portfolio, followed by retail at

attention to the market circumstances, advised by external

23%, office at 19%, and multi-family at 17%. GPIF also has a

consultants.

diversified portfolio of foreign real estate investment focused* The status of investment in foreign real estate is not included in this reportbecause the accounting periods of investee funds have not ended. Relevant
information is provided in “(Column) Global Real Estate Investment Market.”on core-style real estate funds in advanced countries*.

Value by asset type: domestic real estate
Others10%
Logistics
Multi-family

17%

31%

Office19%

Retail23%【Real estate investment case 1】
Retail —U.S.—
GPIF has invested in a fund that owns a portfolio of assets comprising of several “High Street” properties located on 5th
Avenue and Times Square in Midtown Manhattan, New York*. The majority of properties in this portfolio has long-termlease agreements with multiple “class A” tenants including luxury brand stores.

* GPIF implemented evaluating investment in this fund during fiscal 2018 and started investing in April 2019. Accordingly, this is not reflected in theperformance and assets for fiscal 2018.

33

Investment Results in Fiscal 2018

3 Investment in Alternative Assets【Real estate investment case 2】
Office —U.S.—
GPIF has invested in a fund that owns office buildings/R&D facilities located adjacent to the campus of the Massachusetts
Institute of Technology (MIT) in the Boston/Cambridge area, where life science-related companies and research institutions
are concentrated and rapidly growing*. Tenants include major pharmaceuticals companies.

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* GPIF implemented evaluating investment in this fund during fiscal 2018 and started investing in May 2019. Accordingly, this is not reflected in theperformance and assets for fiscal 2018.

【Real estate investment case 3】
Retail—Japan—GPIF has invested in a fund that owns a large, prime retail facility located in the central area of Chuo-ku, Tokyo. This houses
diverse types of tenants, including global-brand flagship stores.

34

Investment Results in Fiscal 2018

3 Investment in Alternative Assets【Real estate investment case 4】
Logistics —Japan—
GPIF has invested in a fund that owns a large logistics facility located in Koto-ku, the Tokyo Bay area. The property has
a long-term lease agreement with a leading logistic company. Demand for logistics facilities is rapidly growing with the
expansion of e-commerce, and a large-scale logistic facility located in central Tokyo Bay has a competitive advantage due
to a scarcity of supply pipe-line.

【Real estate investment case 5】
Private REITs
Since the start of domestic real estate investment in January 2018, GPIF has invested in eight private REITs with diversified
portfolios, and their total market value as of the end of March 2019 was ¥15.6 billion.
Portfolio holdings of private REIT as of the end of March 2019
Private REIT nameMarket value(¥billion)

SG ASSETMAX-REIT

SG ASSETMAX CO., LTD.

1.5

DBJ PRIVATE INC.

DBJ ASSET MANAGEMENT CO., LTD.

1.3

DREAM PRIVATE REIT INC.

DIAMOND REALTY MANAGEMENT INC.

2.7

NIPPON OPEN ENDED REAL ESTATEINVESTMENT CORPORAIONMITSUBISHI JISHO INVESTMENT ADVISORS, INC.

2.3

NIPPON TOCHI-TATEMONO PRIVATE REIT INC.

NITTOCHI ASSET MANAGEMENT CO., Ltd.

1.4

NOMURA REAL ESTATE PRIVATE REIT, INC.

NOMURA REAL ESTATE ASSET MANAGEMENT
CO., LTD.

2.0

BROADIA PRIVATE REIT, INC.

TLC REIT MANAGEMENT INC.

2.6

MITSUI FUDOSAN PRIVATE REIT INC.

MITSUI FUDOSAN INVESTMENT ADVISORS, INC.

1.8

Total
* Funds are listed in the order of the Japanese syllabary.
* The name of funds are as of the end of March 2019.

35

Asset manager name15.6

Investment Results in Fiscal 2018

3 Investment in Alternative Assets(Column) Global Real Estate Investment Market
In fiscal 2018, GPIF selected its “first external investment manager for foreign real estate mandate” and started investments
mainly in core-style real estate funds in advanced economy markets.
The foreign real estate investment market is large. Real estate funds in those markets have attracted many institutional
investors including pension funds and sovereign wealth funds of various countries.

1

Estimated market size of advanced countries by region

USD billion

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4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Europe/Africa

Asia/Australia(excluding Japan)

Japan

North America(Source) MSCI Real Estate Market Size 2017

Among others, the open-ended fund* market in the U.S. is recognized as the most mature market given its long history
and large size. The market has many core-style real estate funds that make diversified investment in multiple property
types, such as office, retails, multi-family housing, and logistics located in multiple cities. They have attracted institutional
investors that pursue stable income on a long-term basis. GPIF also started investing in global real estate through thismarket.
The following chart shows trends in net asset value and annual rate of return of core-style open-ended funds that employ
a diversified investment strategy, published by the National Council of Real Estate Investment Fiduciaries (NCREIF) since
2010.
Open-ended diversified core fund in the U.S.

USD billion

%

250

25

Net assets amount (left scale)

Annual rate of return (right scale)

200

20

150

15

100

10

50

5

0

2010

2011

2012

2013

2014

2015

2016

2017

0

2018 year(Source) NCREIF NFI-ODCE* Open-ended funds in the U.S.: These funds have the following similar profiles with Japanese private REITs: (i) they are unlisted and thus less affectedby volatility in the public equity market; (ii) their investment units have a certain degree of liquidity; and (iii) they have going-concern investment
periods without a specific horizon.

36

Investment Results in Fiscal 2018

3 Investment in Alternative Assets[5] Portfolio risk management
In fiscal 2018, the portfolio risk management system for

managers and monitoring pre and post investment phase.

alternative investment has been enhanced, with substantial

Collaboration between risk management department

capital deployment by discretionary asset managers (multi-

responsible for the entire GPIF and the Private Market

manager investment strategy) for infrastructure and realInvestment Department were facilitated, enabling more

estate. The key issues of risk management were sorted out

elaborate risk management.

for the processes of selecting candidates for external asset

Portfolio risk management system for alternative investments• Final review of risk items used incontinuous evaluation of asset managers
pre/post selection• GPIF’s entire portfolio risk measurement
and analysis

Checks&Balances

Typical items common to traditional assets
Department for
GPIF’s entire
portfolio risk
management■ Market risk
■ Liquidity risk
■ Credit risk
■ Country risk, etc.

Entire portfolio risks

Collaboration
Typical items specific to alternative assets

Alternative
investment
specific risks■ Expertise of asset managers specific to asset class■ Organizational stability suitable forlong-term investment■ Validity of fair value measurement, etc.

Private Market
Investment
Department(risk management)

Private Market
Investment
Department(investment)• Continuous evaluation of asset
managers pre/post selection• Continuous monitoring of portfolio
construction status

Information Sharing• Continuous monitoring ofvarious risk items and qualitativechanges such as organizationalchanges of asset managers

In September 2017, interests in limited partnerships (LPs) as

GPIF Act (refer to page 27). GPIF has been working continuously

limited partners were added to the securities in which GPIF

on strengthening its risk management framework.

may invest by revising the Ordinance for Enforcement of the37(Note) Above items are especially critical foralternative investments with lower liquidity.

Investment Results in Fiscal 2018

4 Stewardship Responsibilities

4 Stewardship Responsibilities[1] Objectives and significance of stewardship activities
In its Investment Principles and the Code of Conduct, GPIF

pension finance with an investment horizon of as long as 100

stipulates that it promotes activities to fulfill its stewardshipyears) to bridge the intergenerational gap of contribution,

responsibilities (hereinafter “stewardship activities”) with

it is essential for GPIF to minimize negative externalities ofthe objectives of appropriately fulfilling its responsibilities

corporate and government activities (environmental andto pension beneficiaries, as their fiduciary, and increasingsocial issues, etc.) and to promote steady and sustainable

investment returns over the medium to long term. The

growth of the overall capital market as well as its underlying

Investment Principles were partially amended in Octobersociety. Except for some investment products, GPIF makes2017 to stipulate that ESG (environmental, social anddaily transactions and investments, and exercises voting

governance) factors should be taken into consideration inrights, via external asset managers. Therefore, by promoting

stewardship activities.

constructive dialogue (engagement) in consideration

A s i l l u s t r a t e d b e l o w, G P I F a s s u m e s s t e w a r d s h i pof ESG factors between its external asset managers andresponsibilities to pension beneficiaries, while external

investee companies as well as issuers, GPIF is committed

asset managers entrusted with investment by GPIF assume

to conducting stewardship activities as a universal ownerstewardship responsibilities to GPIF.

and a cross-generational investor and fulfilling stewardship“Universal owner” and “cross-generational investor” are theresponsibilities and build a win-win relationship in the

key terms for GPIF to fulfill its stewardship responsibilities

investment chain. In this investment chain, a long-term

appropriately. As a “universal owner” (an investor with a

improvement in corporate value would lead to the growthvery large fund size and a widely diversified portfolio) andof the overall economy, which will eventually enhance long-a “cross-generational investor” (responsible for supporting

term investment returns.

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Government Pension Investment Fund, Japan (GPIF)

Fiduciary duty
Stewardship responsibility

Entrust funds

Contribute premiums

Fiduciary duty

(via Pension Special Account)

Stewardship responsibility

IR(Investor Relations)Improve long-term returns

Employer(For listed companies)

Engagement

Corporate governance code

External asset
managerCompany

Stewardship code

Stewardship
activities

Enhance long-term corporate value

Sustainable growth of the economy

38

Investment Results in Fiscal 2018

4 Stewardship Responsibilities[2] Progress in and foundation of stewardship activities
GPIF implemented stewardship activities on a full-scalebasis following the adoption of Japan’s Stewardship
Code in May 2014. In March 2015, GPIF formulated theInvestment Principles, which lay down its guiding principlethat GPIF is committed to increasing investment returns
over the medium to long term for pension beneficiaries
by conducting various activities to fulfill its stewardship
responsibilities in equity investment. In September 2015,
GPIF signed the Principles for Responsible Investment (PRI)
introduced by the United Nations, as part of GPIF’s efforts toenhance ESG implementation.
On June 2017, GPIF established the Stewardship Principles
and the Proxy Voting Principles. The objective of thesetwo principles is, as a responsibility of a super long-term

asset owner, to clarify the requirements and principles thatexternal asset managers should observe in conducting
stewardship activities, including the exercising of voting
rights. GPIF requires external asset managers to comply
with these principles, and if an asset manager should
decide not to comply with any of them, said manager
is required to explain to GPIF the rationale behind thenon-compliance. In order to fulfill its own stewardship
responsibilities, GPIF appropriately monitors thestewardship activities of external asset managers, including
the exercise of voting rights, and proactively conducts
dialogue (engagement) with them. The Stewardship
Principles are comprised of the following five items.

【Stewardship Principles】

1 Corporate Governance Structure of Asset Managers
2 Management of Conflicts of Interest by Asset Managers
3 Policy for Stewardship Activities, including Engagement
4 ESG Integration into the Investment Process
5 Exercise of Voting Rights
G P I F u p d ate d t h e Po l i c y to Fu l f i l l S te wa rd s h i p
Responsibilities in August 2017 to endorse Japan’s
Stewardship Code that was revised in May of that year.
In October 2017, GPIF revised the Investment Principles
to expand the scope of stewardship activities to cover all
asset classes, as it had been focused on equity investment,
and made it clear that ESG factors should be considered in
conducting stewardship activities.

September 2015
Signed “PRI”

May 2014
Acceptance of Japan’s
Stewardship Code

39

March 2015
Announced “Investment
Principles”
Fulfill our stewardship
responsibilities inequity investment

Strengthen
implementation of ESG

GPIF’s stewardship activities are founded on the abovem e n t i o n e d I nve s t m e n t Pr i n c i p l e s, Po l i c y to Fu l f i l l
Stewardship Responsibilities, Stewardship Principles, andProxy Voting Principles. We will continuously examine
appropriate stewardship responsibilities for a public pension
fund and promote activities to fulfill our stewardship
responsibilities.

June 2017
Announced “Stewardship
Principles” & “Proxy
Voting Principles”
Request ESG integration
to external asset
managers

August 2017
Endorsement to therevised Japan’s
Stewardship Code

October 2017
Revised “Investment
Principles”
Expand stewardship &ESG activities to all
asset classes

Investment Results in Fiscal 2018

4 Stewardship Responsibilities[3] Promotion of activities aimed at fulfilling stewardship responsibilities① Participation in global initiatives
A. Support for the TCFD
TCFD stands for Task Force on Climate-related Financial
Disclosures, established by the Financial Stability Board (FSB)
at the request of the G20 Finance Ministers and Central Bank
Governors Meeting. In June 2017, TCFD released voluntary
recommendations for use by companies in providing
information on the financial impacts of climate-related risks
and opportunities for appropriate investment decisions byinvestors. More than 620 organizations worldwide, including
asset owners such as pension funds, asset managers,
financial institutions such as banks, companies, andgovernments, have endorsed TCFD recommendations (as ofMarch 31, 2019).
GPIF expressed its support for TCFD in December 2018.
GPIF emphasizes information disclosure by companies,

which is indicated in our selection of ESG indices, including
environmental indices, as we ensure that the index has a“mechanism to encourage disclosure of ESG information.”With respect to climate change, all passive managers fordomestic and foreign equities and approximately 75% ofactive managers for domestic and foreign equities listed theissue as a material ESG issue in a survey conducted by GPIF.
We also assume that climate change is an important issue forasset owners as well. Accordingly, we will consider our own
disclosure and collect relevant information, while examining
the status of endorsement of the TCFD recommendations byasset managers and how they will implement climate-related
information disclosure.

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B. Participation in Climate Action 100+
Climate Action 100+ (hereinafter, “CA 100+”), launched in
September 2017, is a five-year initiative, established under
the PRI and four groups of institutional investors that
requires companies to address climate change issues. By
constructive dialogue with companies that are influential
significantly in formulating possible solutions to global
environmental issues, this initiative focuses on improving
climate change-related governance, taking initiatives forthe reduction of greenhouse gas emissions, and enhancing
information disclosure, among other matters. At present,
more than 320 organizations including asset owners, suchas pension funds, and asset managers, have joined CA100+.

Signed in Principles for Responsible Investment
in September 2015
Six principles were advocated in 2006 by Mr. Annan,
then Secretary General of the UN. Demand institutional
investors to include ESG in the investment process.
In January 2017, Hiro Mizuno took office as a MD of the PRI
Association, and joined the Asset Owner Advisory Committee andthe SDGs Advisory Committee. GPIF acquired A+, the highest scorein strategy and governance module in 2018 assessment.

Announced its support in Task Forceon Climate-related Financial Disclosurein December 2018

GPIF joined CA100+ as a Supporter* in October 2018. GPIF
has also joined the Asia Advisory Group, which provides
the steering committee with advice on the characteristicsof the Asian region as an asset owner. Joining the activities
of CA100+ helps GPIF broaden its horizons on how
engagement relating to climate change and collective
engagement are actually conducted, and we will use such
expertize for evaluating the stewardship activities of external
asset managers.
* The qualifications of Supporters include: (1) being an asset owner; and (2)having officially announced consent to the Sign-on Statement. GPIF is not
permitted by laws and ordinances to engage investee companies, and has
thus joined CA100+ as a Supporter that is not required to engage them.

Signed in 30% Club in the UK and Thirty
Percent Coalition in the U.S., in November
2016
Both were established to seek diversity on board of
directors, with the aim of achieving 30% female
directors.

Joined Climate Action 100+ in October 201840

Investment Results in Fiscal 2018

4 Stewardship Responsibilities② Survey on compensation schemes for executives and employees (an incentive structure)of external asset managers
GPIF attaches importance to the alignment of interest withdirectors in charge of human resources about their approach,external asset managers. This survey of asset managers

policy and systems of compensation. We reaffirmed thatfor domestic and foreign bonds and domestic and foreigncompensation schemes are considered to indicate anequities, was conducted with the aim of examining theimportant engagement theme that reflects fundamentalalignment between asset managers and GPIF from theprinciples of asset managers, such as their investment

viewpoint of compensation. Specifically, the survey focused

philosophy and corporate culture.

on the following two points: 1) whether the compensation

GPIF has already entered into multi-year contracts with

scheme for executives and employees of external asset

some active managers, and considers that an appropriate

managers is designed to contribute to the improvement ofcompensation scheme is one of the effective measureslong-term returns as expected by a long-term asset ownerto ensure alignment in seek ing long term- oriented

such as GPIF; and 2) whether the incentive scheme is notpartnerships with asset managers. We will utilize the results

designed solely for fostering short-termism. In interviewsof the survey for engaging with asset managers moving

with individual asset managers, GPIF directly talked withforward.

executives of asset managers including CEOs, CIOs, and③ Proposal of new business models by passive managers
In March 2017, GPIF started calling for applications forunder the GPIF’s Stewardship Activities Report 2017, andasset managers for domestic equities (passive investment),

appointed several asset managers. In selecting the asset

and received proposals from new and existing managers

managers, GPIF reviewed their investment process andfor new business models with enhanced stewardshippolicy for stewardship activities, as well as their overall

activities. GPIF examined those proposals as falling underbusiness model including organizational structure and fee“proposals for business models for ‘new passive investment’levels in order to implement such process and policy. The key

that emphasizes stewardship responsibilities“ stated inpoints for evaluation are as follows.

“Expectations & Challenges for External Asset Managers”【Setting of appropriate KPI】
Medium- to long-term goals for engagement activities
Annual plan for their achievement (milestone)【Engagement system and method】
Organizations and persons in charge of stewardship activities
Method of engagement

GPIF will examine and evaluate the status of achievement of the KPI and the milestones for the following fiscal year, and decide
whether GPIF will renew contract with asset managers based on the result of evaluation.

41

Investment Results in Fiscal 2018

4 Stewardship Responsibilities④ Other activities for enhancing investment chain
In order to build the investment chain so that the return forpension beneficiaries can be increased over the medium- tolong-term, GPIF has held two forums since 2016: the Businessand Asset Owners’ Forum and Global Asset Owners’ Forum.
In the former, opinions from companies can be collectedenvironmental stock indices and the commencement ofinvestment linked to those indices, senior executives haveattended conferences and seminars to give a presentations,such as “Evolution in ESG Investment: From the Perspectiveof the Environment” (Supported by The Japan Businesson a regular basis, whereby in the latter, opinions can beexchanged with asset owners from abroad. Separatelyfrom these two forums, following the selection of global

Federation, Japan Association of Corporate Executives, andthe Japan Chamber of Commerce and Industry) in November
2018, in an effort to deliver our message.

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A. Business and Asset Owners’ ForumIn a questionnaire survey conducted with listed companies
in January 2016, many companies requested meetings withasset owners. As a result, GPIF has been holding meetings
with those companies on a regular basis. Furthermore,
several companies proposed the establishment of a regularplatform for the constructive exchange of opinions between
companies and GPIF, as an asset owner. In response, the first
Business and Asset Owners’ Forum was held on September
1, 2016 by three co-organizers. The forum was held again
in April and October 2018, with the participation of 10
companies in total, including the three co-organizers.
At the forums, participating companies held discussions

including index providers, initiatives for strengthening
ESG (organizational reforms, promotion of dialogue, etc.),
ESG information disclosure, such as integrated reports,
appropriate quarterly financial reporting, and expectations
for asset owners including GPIF. GPIF continues to holdthe Business and Asset Owners’ Forum, as we believe theopportunity to listen to companies’ voices is very useful for
GPIF to fulfill its stewardship responsibilities. GPIF feeds backcompanies’ opinions to asset managers and overseas asset
owners as well so that we can contribute to improve andoptimize the whole investment chain.

on the appropriateness of assessment by ESG evaluators
B. Global Asset Owners’ ForumIn July 2016, GPIF established “Global Asset Owners’ Forum”
as a venue for the sustainable exchange of opinions withasset owners overseas, in order to improve our stewardship
responsibilities for our beneficiaries by utilizing expertise of

Owners’ Forum convened in Tokyo in October 2018 and in
Washington, D.C. in March 2019. The Tokyo meeting in
October was attended by members consisting mainly ofCEOs and CIOs, and discussed issues and challenges of the

public pension funds in the world.
On November 14, 2016, the first Global Asset Owners’ Forum
was hosted by GPIF, CalPERS (California Public Employees’
Retirement System) and CalSTRS (California State Teachers’
Retirement System) as co-chairs. Recently, the Global Asset

whole investment chain. CIOs from three co-leading hosts
also participated in the Global ESG Dialogue Forum (coorganized by the Japan Business Federation and the Ministryof Economy, Trade and Industry), as speakers.

42

Investment Results in Fiscal 2018

4 Stewardship Responsibilities

 onducting a Survey of Listed Companies regarding Institutional Investors’ stewardship activities⑤C
A. Objective of the survey

43

As GPIF entrusts domestic equity investment of the pension

listed companies is to examine the validity of the stewardshipreserve to external asset managers, it requests them toactivities of asset managers. In 2018, GPIF conducted a fourthenhance their stewardship activities. To ascertain how

survey, by sending questionnaires to the TSE-listed 2,129

investee companies fulfill their stewardship activities ascompanies* for the purpose of assessing stewardshipasset managers, including engagement among them, GPIF

activities and “constructive dialogue (engagement) of asset

conducted the first “Survey of Listed Companies regarding

managers as well as understanding any changes during theInstitutional Investors’ Stewardship Activities” in 2016, of JPX

year since the previous survey.

Nikkei Index 400 companies. The purpose of this survey to* The number of companies is as of December 20, 2018.

Investment Results in Fiscal 2018

4 Stewardship Responsibilities

B. Summary of the results of the survey
Of the survey respondents, 40 percent answered that there
had been positive changes to the attitudes of institutional
investors at IR meetings, etc. over the past year. The resultsof the questionnaire show that companies’ ESG awarenessand initiatives, as well as information disclosure, are
improving significantly, as indicated by the enhancement ofcompanies’ non-financial information disclosure including
ESG information, the high-level of recognition of SDGs, andclimate change being listed as the most important theme ofcorporate ESG activities followed by corporate governance.
The results have also shown that companies have perceived
positive changes in investors’ interest in and utilization of

non-financial information. Many respondents voiced thatthey expect GPIF to: (i) encourage asset managers andsecurities companies (through asset managers) to conduct
dialogue from a long-term perspective; (ii) promote reforms
of asset managers including personnel and evaluation
systems that can contribute to facilitating dialogue withcompanies and establishing ESG from a medium- to longterm perspective; (iii) promote ESG investment and direct
and indirect stewardship activities that will involve small cap
companies; and (iv) encourage ESG evaluators to improve

33%

Response rate by company size
Inside: response rate basedon the number ofcompanies
Outside: response rate basedon market cap

84.0

Large-cap

Mediumcap

Responded

62.5

16.6

Small-cap

No response
0

1,525 companies
72 %1

their governance.

Respondents’ coverage604
companies
28 %

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20

40

60

80

100
%

67%

Institutional investors utilization of integrated reports

39.4

This survey

52.9

They appear to use reports
more effectively than before
No significant changes

7.7

Do not appear to use reports
effectively

17.5

Previous survey

73.9

0

20

8.5

40

60

80

100
%

Where to obtain non-financial information + Reactions of institutional investors①Financial results
briefing

45.4
42.6
72.0
69.8

②IR meeting③Briefing on ESG
issues8.4
4.8④Do not provide
information sessions
particularly

0

20.7
24.7
20

40
This survey

60Previous survey

80
%

①

This
survey 5.1
Previous 5.7
survey②Thissurvey 5.0
Previous 5.3
survey③ThissurveyPrevious
survey

40.6

0

20

46.5

39.2

42.1

9.2

40.8

11.4

72.8

20.4

67.6

23.3

54.4

Investors showed
high interests
overall

25.3
12.5
40

Some investors
showed interests

3.8

9.4

37.5

60

80

Investors
showed little
interest overall

1.7
3.7

16.5

100
%

Investors
showed nointerest

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Investment Results in Fiscal 2018

4 Stewardship Responsibilities[4] Material ESG issues recognized by external asset managers
Material ESG issues recognized by external equity managers
are as follows. GPIF found that all passive managers thatkeep holding investees’ stocks recognize climate change asa material ESG issue and tend to regard long-term issues
such as “E” (environmental) and “S” (social) as particularly
critical. Regarding active managers with a primary holding
period of approximately several months to a few years,
different ESG issues were recognized as material dependingon whether they are managers for domestic equities orforeign equities. GPIF found that material issues recognizedby active managers for domestic equities has expanded toinclude “E” (environmental) and “S” (social), in addition to“G” (governance), but they see “structure and evaluationof Board of directors” and other “G” (governance) issues as
more critical. In the survey of listed companies, corporate

governance was the most common theme of ESG activities
of Japanese companies. Taking TCFD recommendations,which GPIF supports, for example, companies are required
to disclose information on their recognition and analysis
on, climate change-related risks and opportunities, as well
as strategies for this issue, and management framework(governance) for its implementation. It shows that a common
awareness has been formed among both investors andcompanies that “G” (governance) is a necessary framework
to ensure the resolution of long-term issues including “E”(environmental) and “S” (social) such as climate change, andto improve companies’ sustainable growth and corporate
value over the medium and long term. GPIF’s Stewardship
Principles require proactive engagement in material ESG
issues by external asset managers.

<Passive managers for domestic equities>
1
1
1
4
4
4
4
4

Climate change
Supply chain
Misconduct
Capital efficiency
Disclosure
Human rights and community
Diversity
Other (Governance)<Active managers for domestic equities>
1
2
2
4
5
5
5
5

<Passive managers for foreign equities>
1
1
1
1
5
5
5
5
5
5
5
5
5

Climate change
Diversity
Water stress, water security
Other (Social)
Environment opportunity
Corporate governanceSupply chain
Disclosure
Deforestation
Board structure and self-evaluation
Misconduct
Risk management
Other (Governance)

Board structure and self-evaluation
Capital efficiency
Minority shareholder rights (cross shareholding, etc.)
Supply chain
Corporate governance
Disclosure
Misconduct
Labor standard<Active managers for foreign equities>
1
2
3
3
3
3
3

Climate change
Supply chain
Environment opportunity
Corporate governanceDiversity
Board structure and self-evaluation
Other (Social)(Note 1) This survey was conducted towards GPIF’s external asset
managers for equities as of December 2018.
(Note 2) Issues listed by all asset managers are marked in red.
(Note 3) Numbers in the box represent the ranking.

[5] Definition of ESG integration
As described on page 39, GPIF requires that external asset managers pursue “ESG integration into their investment process” in its
Stewardship Principles. GPIF defines ESG integration as “the explicit and systematic inclusion of ESG issues in investment analysis
and investment decisions” following by PRI, to which GPIF is a signatory.

[6] Exercise of voting rights① Concept of exercise of voting rights
The Medium–term Objectives of the Minister of Health,Labour and Welfare stipulate that GPIF should pay due
consideration not to unduly exert influence on corporate
management and should take appropriate measures
including exercise of voting rights from the viewpoint of
maximizing the long–term interest of shareholders, whileconsidering influence on corporate management.
In this regard, GPIF in its Medium–term Plan states, “GPIF
itself does not exercise voting rights and instead entrusts theexternal asset managers with the exercise of voting rights so
as not to give rise to a concern that GPIF could have a direct
influence over corporate management.

45

GPIF also suggests to the external managers that they should
recognize the importance of corporate governance andthat the voting rights should be exercised to maximize thelong–term interest of shareholders. GPIF asks each external
asset manager to establish a detailed proxy voting policy(guideline) and to report the voting results to GPIF.”
External managers submit the guideline for voting andannually report voting results to GPIF. GPIF holds meetings
with the managers on the results, and evaluates the way
in which a manager exercises voting rights in the annual
evaluation process of each manager, considering their
exercise as an item of initiatives for fulfilling stewardship
activities.

Investment Results in Fiscal 2018

4 Stewardship Responsibilities② Exercise of voting rights in fiscal 2018
GPIF held meetings based on the reports on the status offor the exercise of voting rights,” “organizational framework,”

exercise of voting rights from April to June 2018. Then, weand “the status of exercise of voting rights.” As a result, weevaluated asset managers based on the reports and theconfirmed that voting rights were appropriately exercised.

meetings from the viewpoints of “establishing of guidelines

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The status of exercise of voting rights by external asset managers for domestic equities (from April 2018 to March 2019)

1

Number of external asset managers who exercised voting rights: 33 funds
Number of external asset managers who did not exercise voting rights: none
(Unit: No. of proposals; percentage)
Proposal pertaining to company organization
ProposalManagement
proposals

Number of voting
rights exercised

Total
Approved
OpposedShareholder
proposals

Total
Approved
Opposed

Proposals pertaining to capital management(excluding items pertaining to amendmentof the articles of incorporation)

Proposals pertaining to director
remuneration, etc.

Appointment of
directors

External
directors

Appointmentofauditors

External
auditors

146,680

42,76816,235

10,926309

146,399

42,674

16,203

10,926309(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)

Proposals
pertaining toamendmentof
Acquisition Mergers,
Dividends of treasury acquisition, the articles ofincorporation
stock
etc.

Poison Pills(Rights plan)

Other
proposals

Total

Director
bonuses

Director
retirement
benefits

Grantingof stock
options

4,190

1,604

1,279

1,057

12,674

11

970

5,224

411

1

229

4,167

1,604

1,279

1,057

12,599

4

970

4,113

411

1

212

189,328(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)Appointment
Directorof accounting
remuneration
auditors

Warning
type

Trust–
type

190,874

131,668

36,902

13,892

8,719

305

3,839

1,327

503

814

12,150

4

954

4,015

41

0

196

169,708(89.9%)(86.5%)(85.7%)(79.8%)(98.7%)(92.1%)(82.7%)(39.3%)(77.0%)(96.4%)(100.0%)(98.4%)(97.6%)(10.0%)(0.0%)(92.5%)(89.6%)

14,731

5,772

2,311

2,207

4

328

277

776

243

449

0

16

98

370

1

16

19,620(10.1%)(13.5%)(14.3%)(20.2%)(1.3%)(7.9%)(17.3%)(60.7%)(23.0%)(3.6%)(0.0%)(1.6%)(2.4%)(90.0%)(100.0%)(7.5%)(10.4%)

281

94

32

0

0

23

0

0

0

75

7

0

1,111

0

0

17

1,546

(100.0%)(100.0%)(100.0%)(0.0%)(0.0%)(100.0%)(0.0%)(0.0%)(0.0%)(100.0%)(100.0%)(0.0%)(100.0%)(0.0%)(0.0%)(100.0%)(100.0%)

12

9

0

0

0

7

0

0

0

25

2

0

100

0

0

3

149

(4.3%)(9.6%)(0.0%)(0.0%)(0.0%)(30.4%)(0.0%)(0.0%)(0.0%)(33.3%)(28.6%)(0.0%)(9.0%)(0.0%)(0.0%)(17.6%)(9.6%)

269

85

32

0

0

16

0

0

0

50

5

0

1,011

0

0

14

1,397

(95.7%)(90.4%)(100.0%)(0.0%)(0.0%)(69.6%)(0.0%)(0.0%)(0.0%)(66.7%)(71.4%)(0.0%)(91.0%)(0.0%)(0.0%)(82.4%)(90.4%)(Note 1) If a proposal has multiple items to exercise, the number of votes exercised for each item is shown.
(Note 2) The figures in parentheses are percentages to the total number of votes exercised for each proposal.
(Note 3) The negative votes include one abstention.

The status of exercise of voting rights by external asset managers for foreign equities (from April 2018 to March 2019)
Number of external asset managers who exercised voting rights: 25 funds
Number of external asset managers who did not exercise voting rights: none
(Unit : No. of proposals, percentage)

ProposalManagement
proposals

Number of voting
rights exercised

Total
Approved
OpposedShareholder
proposals

Total
Approved
Opposed

Proposal pertaining to company
organization
Appointment of
directors

Proposals pertaining to capital management(excluding items pertaining to amendmentof the articles of incorporation)

Proposals pertaining to director
remuneration, etc.

Appointment Appointment
Directorofof accounting
remuneration
auditors
auditors

Director
retirement
benefits

Director
bonuses

Granting ofstock
options

Dividends

Acquisitionof treasury
stock

Mergers,
acquisition,etc.

Proposals Poison Pills
Other proposals
pertaining toforamendment of
warning Approval of
Other
the articles offinancial
type
proposals
incorporation
statement, etc.

Total

103,285

4,140

12,404

22,168

208

398

4,216

9,877

5,416

16,242

7,786

290

13,291

39,659239,380

101,316

3,592

12,321

21,844

208

392

4,182

9,834

5,416

16,183

6,884

278

13,28536,287232,022(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)91,0893,158

12,152

18,820

161

300

2,988

9,777

4,908

13,782

6,247

190

12,80531,720208,097(89.9%)(87.9%)(98.6%)(86.2%)(77.4%)(76.5%)(71.4%)(99.4%)(90.6%)(85.2%)(90.7%)(68.3%)(96.4%)(87.4%)(89.7%)

10,227

434

169

3,024

47

92

1,194

57

508

2,401

637

88

480

4,567

23,925(10.1%)(12.1%)(1.4%)(13.8%)(22.6%)(23.5%)(28.6%)(0.6%)(9.4%)(14.8%)(9.3%)(31.7%)(3.6%)(12.6%)(10.3%)

1,969

548

83

324

0

6

34

43

0

59

902

12

6

3,372

7,358

(100.0%)(100.0%)(100.0%)(100.0%)(0.0%)(100.0%)(100.0%)(100.0%)(0.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)

1,072

421

77

118

0

0

9

19

0

50

465

11

6

1,772

4,020

(54.4%)(76.8%)(92.8%)(36.4%)(0.0%)(0.0%)(26.5%)(44.2%)(0.0%)(84.7%)(51.6%)(91.7%)(100.0%)(52.6%)(54.6%)

897

127

6

206

0

6

25

24

0

9

437

1

0

1,600

3,338

(45.6%)(23.2%)(7.2%)(63.6%)(0.0%)(100.0%)(73.5%)(55.8%)(0.0%)(15.3%)(48.4%)(8.3%)(0.0%)(47.4%)(45.4%)(Note 1) Total number of votes exercised does not include the number of voting rights that were not exercised.
(Note 2) If a proposal has multiple items to exercise, the number of votes exercised for each item is shown.
(Note 3) The figures in parentheses are percentages to the total number of votes exercised for each proposal.
(Note 4) The negative votes include 946 abstentions.

46

Investment Results in Fiscal 2018

5 ESG Activities

5 ESG Activities[1] Basic approach

Universal owner PIF is an investor with a very large fund size and a widely diversified
G
portfolio.

Cross-generational investor

GPIF is responsible for supporting pension finance with an investment
horizon of as long as 100 years, over several generations.
GPIF promotes ESG investments in order to reduce negative
externalities such as environmental and social issues, andto improve the sustainable return from the whole assets, as
GPIF is “Universal owner” and “Cross-generaitonal investor.”“Universal owner” is a term often used in relation to pension
management and ESG investment, referring to an investor

with a well-diversified portfolio that largely represents theworld’s capital market. GPIF is a typical “universal owner”
with a broadly diversified portfolio comprised of equities andbonds of the majorities of Japanese listed companies andmajor foreign companies.

The number of securities owned by GPIF (as of the end of March 2019)
3,000
2,500

(The number of securities)

2,731
2,380

2,449

2,124

2,000
1,500
1,000
500
0

TOPIX

Domestic equities
owned by GPIF

For instance, if the share prices of some portfolio companies
increase as a result of conducting business activities without
paying attention to their large impacts on the environmentand society for the sake of short-term revenue expansion,and society and the economy as a whole, including othercompanies, are negatively affected by such activities, theoverall portfolio of a universal owner will be significantly
impaired. In other words, the sustainability of the capital
market and society is a prerequisite for the sustainabilityof universal owners’ portfolios. The “universal ownership,”the concept that universal owners conduct ESG activities
proac tively to control and minimize such negative
externalities—lies at the core of GPIF’s ESG investment. In
addition, the longer the ESG risks persist, the more likely itis that they will materialize. Therefore, we consider that it
has great benefits for GPIF to integrate ESG factors into its

47

MSCI ACWI
Foreign equities(excluding Japan) owned by GPIF

investment process as a super long-term investor responsible
for supporting pension finance designed with time horizonof as long as 100 years. That is to say, conducting ESG
activities is consistent with the objective of the Employees’
Pension Insurance Act and the National Pension Act to“manage pension reserve safely and efficiently from a longterm perspective solely for the pension beneficiaries,” andGPIF continues promoting ESG activities proactively.
GPIF conducts ESG activities not only for equities but also
for other asset classes, including bonds and alternative
assets, with the aim of maximizing medium- to longterm investment returns for the pension beneficiaries.
Evaluation of ESG promotion activities requires the following
perspectives: 1) it takes a long period of time for the effectsof ESG investment to materialize; and 2) ESG investment
is also aimed at improving the sustainability of the entire

Investment Results in Fiscal 2018

capital market. These perspectives are different from generalinvestment evaluation of how much investment returns are
generated over a certain period. GPIF published the first“ESG Report” in 2018 in order to measure the effects of the

5 ESG Activities

ESG activities, including ESG investment that would improve
the sustainability of the capital market and risk-adjusted
returns, and to make the PDCA (plan-do-check-act) cycle
work properly.
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Expansion of
ESG investment（Investment opp or tunit yat low cost）

Improving thesoundness ofpension

Building
sustainable
society

1
Increasing
incentives to enhance theresponse to ESG
by companies

Improvement of the
ESG evaluation ofcompanies

Improvement ofrisk-adjusted returns[2] Passive investment based on ESG indices
In July 2017, GPIF selected two integrated indices and one
thematic index focused on gender diversity for Japaneseequities, and commenced passive investment tracking thoseindices. The selection criteria for the ESG indices included
economic rationality based on the risk-return profile of eachindex and the possibility of these indices to boost the equity
market in Japan through improvement of ESG evaluation.
Given that environmental issues centering on climatechange are transnational global issues, GPIF started to callfor applications for environmental stock indices for global

equities in November 2017. As a result, we selected the S&P/
JPX Carbon Efficient Index for Japanese equities and the S&P
Global Ex-Japan LargeMidCap Carbon Efficient Index forforeign equities in September 2018, and commenced
passive investment tracking those indices. We expect thatthese selected ESG indices will provide an incentive forcompanies to enhance their responses to ESG issues andlead to the improvement of their corporate value in thelong term.

List of selected ESG indices
T he m a t i c i nd i c e s

In teg rat ed in d ices

FTSE Bl os s om

E

( En v i ron m e n t a l)

Ja pa n Ind ex

S&P/JPX
Carbon EfficientIndex Series

S( Soc i a l)

M SCI J a pa n
ESG Sel ec t
Le a de rs Inde x

G(Governance)

MSCI JapanE m p ow e r in g Wom e n
In d e x ( WIN )48

Investment Results in Fiscal 2018

5 ESG Activities

FTSE Blossom Japan Index

MSCI Japan ESG SelectLeaders Index

MSCI Japan Empowering
Women Index (WIN)· The index uses the ESG assessment
scheme that is applied to the
FTSE4Good Japan Index Series which
has one of the longest track records
globally for ESG indexes.
· The index is a broad ESG index that
selects stocks with high absolute ESG
scores and adjusts industry weights
to neutral.

· T he MSCI Japan ESG Select Leaders
I ndex is a broad ESG index that
integrates various ESG risks into today’s
portfolio. The index is based on MSCIESG Research that more than 1,000
clients use globally.
· T he index incorporates stocks withrelatively high ESG scores in eachindustry.

· MSCI calculates the gender-diversity
scores based on various pieces of
information disclosed under “the Act
on Promotion of Women’s Participation
and Advancement in the Workplace”
and selects companies with higher
gender diversity scores from eachsector.
· T he first index designed to cover abroad range of factors related togender diversity.

Subject ofInvestment

Domestic equity

Domestic equity

Domestic equity

Constituent
universe(parent index)

FTSE JAPAN INDEX(513 stocks)

Top 700 companies(in terms of market cap)in the MSCI Japan IMI(694 stocks)

Top 500 companies(in terms of market cap)in the MSCI Japan IMI(498 stocks)

Number of index
constituents

152

268

213

Assets undermanagement¥642.8 billion¥804.3 billion¥474.6 billion

S&P/JPX
Carbon Efficient Index

S&P Global
Ex-Japan LargeMidCap
Carbon Efficient Index

Index
concept

Index
concept

・B ased on carbon data provided by Trucost, one of the pioneers ofenvironmental research companies, S&P Dow Jones Indices, a leading
independent provider, develops the index methodologies.
・The indices are designed to increase index weights of the companies whichhave low Carbon to Revenue Footprints (annual greenhouse gas (GHG)
emissions divided by annual revenues) and actively disclose information ofcarbon emissions.

Subject ofInvestment

Domestic equity

Foreign equity

Constituent
universe(parent index)

TOPIX(2,124 stocks)

S&P Global ex-Japan
LargeMidCap Index(2,556 stocks)

Number of index
constituents

1,738

2,199

Assets undermanagement¥387.8 billion¥1,205.2 billion(Note) Number of index constituents and assets under management are as of March 31, 2019.

<Main Characteristics of carbon efficient indices>
1. Both indices overweight companies that have high carbon
efficiency within the same industry and/or disclose theamount of carbon emissions.
2. Both indices adjust the over/underweight of companies
in accordance with the damage on the environment byindustries to which the companies belong (companies,

49

which belong to an industry that have more damage on
the environment, are more incentivized to improve theircarbon efficiency and disclosure).
3. The S&P/JPX Carbon Efficient Index covers all companies
that are listed on the first section of Tokyo Stock Exchange(with some illiquid stocks excluded) thus the coverage isbroader than other ESG indices.

Investment Results in Fiscal 2018

GPIF believes that in order to encourage companies toaddress ESG issues and disclose information proactively, it
is important to help them deepen their understanding of
the principles of ESG evaluation and index construction.
To promote such understanding, GPIF requests forindex providers to publicly disclose how they conduct

5 ESG Activities

ESG evaluation and how they construct indices, and toproactively engage with companies. As a result, dialogue
between index providers and companies is increasing
rapidly, which we hope to lead to an improvement inresponses to ESG issues and information disclosure by
Japanese companies.

Percentages of companies that made contact with MSCI during the ESG evaluation process

29

Japan

68
49

Germany

60

35

France
UK

27

U.S.

27

Brazil

56

69

0

20

64
65
44

61

31

2016
2017
2018

59
37

Canada78

71

39

Australia

1
76

56
44

40

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57
60

80

100
%

(Note) The objects of this research are companies selected by MSCI ACWI index as of the end of 2018.
(Source) ©2019 MSCI ESG Research LLC. Reproduced by permission.

[3] Collaboration with the World Bank Group regarding green bonds

GPIF has collaborated with the World Bank Group to promote

the World Bank Group-issue Green, Social and Sustainability

sustainable investment, including a joint research report:

Bonds that contribute to building a sustainable society,“Incorporating Environmental, Social and Governanceand provide investment opportunities for GPIF’s asset(ESG) Factors into Fixed Income Investment,” published inmanagers. GPIF promotes ESG integration in investment inApril 2018. Based on our joint research, the International

order to reduce the negative impacts of environmental andBank for Reconstruction and Development (IBRD) and thesocial issues and improve long-term returns on its entire

International Finance Corporation (IFC)-both members ofinvestment assets.

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Investment Results in Fiscal 2018

6 Other Major Initiatives

6 Other Major Initiatives[1] Call for applications from external asset managers① Call for applications through the Asset Manager Registration System
A. Status of the introduction of the Asset Manager Registration System
GPIF expanded the scope of the Asset Manager Registration

The number of
information
provided

Asset class

The number of
entries

The status of registration of external asset managers as ofDomestic bonds

130

the end of fiscal 2018 is as listed in the right table.

Domestic equities

51

10

Foreign bonds

133

21

Foreign equities

521

127

System to all four traditional asset classes in February 2018.

B. Call for applications for managers of foreign bonds (active investment)
GPIF called for applications for active managers for high-advanced the selection process through the stage of second

yield bonds through the Asset Manager Registration System

screening.

to review the existing external asset managers, and
C. Selection for passive managers of domestic equities and foreign equities
GPIF conducted a third screening of passive managers for

newly selected two funds of two passive managers fordomestic and foreign equities through the Assetdomestic equities and one fund of one passive manager forManagement Registration System, for which it hadforeign equities.

completed the second screening process in fiscal 2017, and
D. Call for applications for managers of alternative assets
GPIF has been calling for applications for asset managers

managers for an infrastructure mandate in fiscal 2017, GPIF

who will pursue multi-manager investment strategies forselected one external asset manager for a foreign real estatealternative assets (infrastructure, private equity and realmandate in fiscal 2018. We have started investing in thoseestate) since April 2017, with the aim of improving

assets. Regarding external asset managers for a private

investment efficiency through investment diversification.

equity mandate and a foreign real estate mandate, we are

Following the selection of one external asset manager for agoing through the screening process.

domestic real asset mandate and three external asset

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Investment Results in Fiscal 2018

Flexibly adopt new
asset managers

GPI F
Data Entry

Assessment

New Manager

New Manager

New Manager
New Manager

Screening with utilizing
advice given by external advisor

6 Other Major Initiatives

Data Management

Evaluation

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

Competition

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Selection Process for Asset Managers

Calling for application through the Asset Manager Registration System

Periodic examination• Based on periodic examination of the composition of external asset managers, theoutline, etc. of review of external asset managers is deliberated on at the Board ofGovernors.

Assessment
criteria

Qualitative assessment that takes
into account quantitative
performance• Investment policies
First screening• Based on the documents submitted by asset managers that applied for the AssetManagement Registration System, asset managers subject to the second
screening will be selected.
· Requirements for public invitation, such as approval under relevant laws and regulations· Investment performance, etc.

• Investment processes• Organization and human resources• Corporate governance structure
and conflicts of interest• Internal control
Second screening• Stewardship activities (for equities
and alternative assets)• Interview subject: Newly applied asset managers• Interview questions: (Investment policy, investment process, organization and• Information security measures

human resources, stewardship activities, internal control, administrative operation
system, information security system, etc.)• Administrative operation system• Based on the results of interview, comprehensive assessment, without considering• Information provision, etc.

investment management fees, of asset managers will be conducted. Assetmanagers subject to the third screening will be selected by taking thecomposition of external asset managers into account.

• Investment management fees

Third screening• Interviews will be conducted with newly applied asset managers that have passed
the second screening at their offices (to confirm if their investment philosophy andprocesses are shared by fund managers, etc. who make investment decisions andother matters).

• After interviews are conducted, a comprehensive assessment of newly applied
asset managers and existing asset managers will be carried out by taking
investment management fees into consideration, and GPIF’s asset managers will
be selected.

• The results of selection will be reported to the Board of Governors.

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Investment Results in Fiscal 2018

6 Other Major Initiatives② Introduction of a new performance-based fee structure
In April 2018, GPIF introduced a full-scale performancebased fee structure with the aim of strengthening thealignment of interest between GPIF and external active
managers (encouraging them to achieve an excess rateof return over the benchmark and improving the qualityof excess returns over the long term) and enhancing selfgovernance (more efficient management of investment
capacity) of active managers. The outline of the new
performance-based fee structure is as follows.

Outline of the new performance-based fee structure• Investment fees should be linked to excess returns (i.e., performance-based fees), while active managers that do notdeliver excess returns will only receive fees on a par with those paid to passive managers (i.e., basic fees).

• The fee scheme is structured so that the fee rate applied to funds that achieved target excess return rate is assumed to be
the same level as former performance-based fee structure.

• In exchange for applying fees linked to long-term investment results to some external asset managers, a multi-year
contract is concluded with some external asset managers based on market cycles.

New performance-based fee structure[Relation between excess return rate and fee rate](Fee rate)

0.8%

New performance-based fees

0.7%

No upper limit on the fee
Investment returns are
expressed as an amount.

0.6%
0.5%
Base fee rate(equivalent to therate of passive fund)

0.4%

Former performance-based fees

Break-even point

With upper limit on the fee
Investment returns are
expressed as a percentage.

0.3%
0.2%

Fixed fees

0.1%

Point where
performance-based fees arise

0.0%
-2%

-1%

0%

1%

The fee rate is constantregardless of the level of excess
return rate.

Target excess
return rate

2%

3%

4%

5% (Excess return rate)③ Management and assessment of external asset managers, etc.
A. Management and assessment of external asset managers
To better manage external asset managers, GPIF hasrequested that monthly reports be submitted on investment
performance and risk status to ascertain the status ofcompliance with investment guidelines, and we will receive
further explanations in regular meetings and other activities.
We withdraw funds from three investment funds managed
by external asset managers due to contractual and otherreasons. Based on a comprehensive assessment conductedin fiscal 2017, GPIF decided to give a warning to/or partiallywithdraw funds from four investment funds managed byexternal asset managers (one active domestic equity fund,
two active foreign equity funds, and one passive foreign
equity fund), and withdraw funds from those investment
funds. In fiscal 2018, we also terminated contracts with one
active foreign equity fund and one active foreign bond fund,from which there was deemed to be an urgent necessity
to withdraw funds, and decided to cancel a contract with
one passive domestic equity fund based on a judgment

53

from an investment management perspective. In addition,
as described on page 51, we selected passive managers inforeign equities, and implemented a major replacementof funds accompanied by a withdrawal of funds from thethree investment funds with which we decided to terminate
contracts.
To better manage external asset managers who aretransition managers, GPIF requested reports on transition
management, ascertained the status of compliance withinvestment guidelines, and received explanations in regularmeetings and other activities. Assessment of transition
managers was conducted based on the comprehensive
assessment of items including transaction execution
capability, organizations and human resources. The results ofthis comprehensive assessment showed that there were no
particular problems identified with any transitional manager,
which led us to conclude that it would be appropriate tocontinue with the existing contracts with them.

Investment Results in Fiscal 2018

6 Other Major Initiatives

B. Management and assessment of custodians
To manage custodians, we requested data on asset
management, ascertaining the status of compliance withasset management guidelines, and received explanations
in regular meetings, including onsite inspection, and otheractivities. Assessment of custodians was conducted throughcomprehensive assessment of items including operational

structures and asset management systems. The results ofthis comprehensive assessment showed that there were no
particular problems identified with any custodian, which led
us to conclude that it would be appropriate to continue withthe existing contracts with them.

1

C. Reviewing our approach to asset management
GPIF previously adopted the approach of selecting one
custodian for each asset class to entrust administrative
operations. However, it is widely k nown that suchan approach involves the risk of inter fering with thediversification of investment management and concerns
associated with the business continuity plan (BCP).
Accordingly, GPIF is reviewing its approach to asset
management to enable the adoption of multiple custodians
for managing a single asset class.
It is necessary for GPIF to gather investment data more
quickly than before and use them for risk analysis and othermatters, in order to appropriately carry out risk management
associated with investment diversification and increase theeffectiveness of dialogue with external asset managers.

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Therefore, we have implemented a system for gathering
and using data for investment decisions, separately fromconventional data for accounting purposes.
Regarding the adoption of multiple custodians for managing
a single asset class, GPIF has switched to a multiplecustodian framework for asset classes for which thedevelopment of the necessary systems has been completed.
In 2018, we adopted multiple custodians for managing
foreign bonds and domestic equities. Regarding short-term
assets, we called for applications for custodians from theviewpoint of widely soliciting proposals for more efficientinvestment methods and reducing the risk of concentration
on one custodian, and selected two custodians.

(Note) For the list of external asset managers, etc., refer to page 66-67.

[2] Promoting research and study① GPIF Finance Awards
Today, investment techniques are becoming increasingly
sophisticated and financial products are growing indiversity. In light of this, GPIF believes it is essential tofoster an environment that encourages academic researchin investment fields, so that the pension reserve is invested
safely and efficiently.
In 2018, the ceremony for the 2nd GPIF Finance Awards washeld. The Minister of Health, Labour and Welfare; the Ministerof Education, Culture, Sports, Science and Technology;
and the Deputy Minister of the Cabinet Office for Financial
Services attended the ceremony as guests. The award winner
was determined as follows, after going through a screening
process by the selection committee comprised of renowned
researchers in the field of finance including Dr. Robert
Merton, Professor of MIT (Nobel laureate in economics
in 1997).

Award winner:	Dr. Yoshio Nozawa, Senior Economist, Federal Reserve Board	(Presently, Assistant Professor at the Business School of the Hong Kong University of Science andTechnology)
Profile: 	He graduated from the College of Arts and Sciences, University of Tokyo and earned his MBA and Ph.D.
(joint degree in finance and economics) from the University of Chicago. After working at the Development
Bank of Japan and Federal Reserve Board, he assumed his present post in August 2018.
Reason for winning the award:
For valuable work in a comprehensive approach to corporate bond spread; also, he is expected to advancecorporate bond pricing theory.

54

Investment Results in Fiscal 2018

6 Other Major Initiatives

Selection committee members
Robert Merton	Winner of the Nobel prize in economics, Distinguished professor, MIT Sloan School of Business andprofessor emeritus at Harvard University
Josh Lerner 	Professor, Harvard Business School
Professor, Cambridge Judge Business School, University of Cambridge
David Chambers
Kazuo Ueda 	Professor, Faculty of International Studies at Kyoritsu Women’s University, Director, Center for
Advanced Research in Finance at the University of Tokyo (former chair of the Investment Advisory
Committee)
Chairwoman, Japan Research Institute (member of the Financial System Council)
Yuri Okina
Shinichi Fukuda 	Professor, Graduate School of Economics, University of Tokyo (member of the Financial
System Council)
Yasuhiro Yonezawa
Professor, Waseda Business School (former chair of the Investment Advisory Committee)② Promoting joint research and study
GPIF considers that it is necessary to conduct researchstudies and joint research projects with universities, andaccumulate knowledge acquired through such research

activities in order to continue investments of pension reserve
safely and efficiently. In fiscal 2018, we carried out thefollowing five research studies and joint research projects.

A. Research on compensation scheme (incentive structure) of executives and staff employees of external asset managers
Objectives: GPIF places importance on aligning interest withexternal asset managers. We consider that fundamental
policies of asset managers, such as the investment
philosophy and corporate culture, are reflected in theirremuneration schemes. Accordingly, the compensation
scheme for executives and staff members of asset managers
was studied as a means of confirming the alignment ofinterest between them and GPIF. Specifically, the research

55

study focused on the following two points: (1) Whether the
remuneration scheme for executives and employees at asset
managers is designed to contribute to the improvementof long-term returns as expected by a long-term asset
owner such as GPIF; and (2) that the incentive scheme is notdesigned solely for fostering short-term benefits.
Commissioned for: Mercer Japan Ltd.

Investment Results in Fiscal 2018

6 Other Major Initiatives

B. Research on ESG information disclosure
Objective: GPIF is actively engaging in various ESG initiatives,
such as making passive investment in equities tracking
ESG indices and environmental indices and publishing the
ESG Report. ESG information disclosure of companies andasset managers is a fundamental element of such initiatives,
however there is growing disparity between leaders andlaggards of information disclosure. A possible reason for thisis that many companies are likely to be reluctant to expand
information disclosure with limited management resources
under the present circumstances in which different ESG
information disclosure standards are available without clear
explanations provided on commonalities and differences
across disclosure standards and their definitions.

This research study examined the current situation involving
ESG information disclosure of TCFD, established by the FSB,
and the Sustainability Accounting Standards Board (SASB)in the U.S. At the same time, we researched appropriate ESG
information disclosure that contributes to corporate valueenhancement and appropriate ESG information disclosure by
public pension funds and asset managers.
Based on the results of this research study, GPIF is aiming tofurther improve the quality of ESG investment and enhance
the sustainability of the capital market.
Commissioned for: Nissay Asset Management Corporation

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C. Research on the use of artificial intelligence (AI) to study trading behaviors of fund managers
Objective: In “A study on the Use of Artificial Intelligencewithin Government Pension Investment Fund’s Investment
Management Practices,” carried out in fiscal 2017, the trading
data of GPIF’s active managers for domestic equities wasanalyzed, using machine learning, and showed the possibilityof classifying investment styles into patterns and identifying
style drifting. In the research study project launched in fiscal

2018, more elaborate verification is carried out by expanding
the scope of the constituents of the universe and extending
the measurement period for domestic equities. Also theresearch continued to study whether similar results are
confirmed in foreign equities.
Commissioned for : Sony Computer Science Laboratories, Inc.

D. Joint research project on macroeconomic forecast using the Overlapping-Generations (OLG) Model
Objective: Target returns of public pension fund investment
are determined in comparison with the rate of nominal
wage growth. Therefore, it is important to sophisticate
the macroeconomic forecast model, including forecastsof the rate of nominal wage growth, in order to assess the
profitability of investment assets appropriately. Accordingly,
we enhanced the framework and method of macroeconomic
forecast based on the Overlapping-Generations Modelby factoring in changes in the demographic composition,in particular, the coexistence of the working generationand the retired generation in the household sector, andchanges including a generation transition. In addition, wequantitatively verified the impact of changes in various
parameter scenarios on macroeconomics.
Joint research entity: University of Tokyo

E. Joint research project to incorporate ESG factors into fixed income investment
Objective: GPIF signed the Principles for Responsible
Investment (PRI) in September 2015 and selected ESG
indices for domestic equities in July 2017. Research andthe practice of integration of ESG factors in the investment
process for equities are well underway, but such efforts for
fixed income investment have just started. Therefore, GPIF

and the World Bank Group conducted joint research onpractical issues arising from the integration of ESG factors in
fixed income investing and other issues as the first initiativein a partnership with a view to promoting sustainable
investment.
Joint research entity: The World Bank Group56

Roles and Organizational Operation of Government
Chapter 2 Pension

Investment Fund
1 GPIF’s Roles in the Public Pension Scheme[1] GPIF’s position① The pension finance system and GPIF
Japan’s public pension scheme is fundamentally managed
as a pay-as-you-go system that incorporates the concept
of intergenerational dependenc y, whereby pension
premiums collected from working generations support older
generations, instead of the advance funding method whereby
funds required to cover pension benefits are accumulated inadvance.
Under the pay-as-you-go pension system, it is not generally
necessary to hold a large amount of reserve fund, aside froma payment reserve. However, partly because the Employees’
Pension Fund had started out as an advanced funding
method, the portion of pension premiums not allocated tobenefits had been accumulated as reserve fund. In this sense,
pension reserve has a fundamental significance in the public
pension scheme in that “the portion of pension premiums
not allocated to benefits will be invested as reserve fund tostabilize pension finance.”
Japan’s low birth rate and aging population are progressing
faster than in any other country. Under the pension systemrevision implemented in 2004 (hereinafter the “revision of2004”), the pension premium level will remain fixed into the
future and the finite period of financial equilibrium is set to beapproximately 100 years, covering the period until the current
population would finish receiving the pension premium. Thismeasure was implemented in order to balance the pension
finance over 100 years (the finite financial equilibrium
method). However, the fixing of a funding source for future
pension benefits also makes the amount of fund fixed.
Therefore, a mechanism to automatically adjust the pension
benefit and premium contribution (Macro-Economic Slide
Formula) was also adopted in the revision of 2004. Throughthese measures, the sustainability of the public pension
system is designed to be improved. (see Note)

There are three laws relevant to public pension investment:
the Employees’ Pension Insurance Act; the National Pension
Act; and the Act on the Government Pension Investment Fundas an Incorporated Administrative Agency (hereinafter the“Act on the Government Pension Investment Fund”) . Theselaws provide that “the pension reserve shall be managed
safely and efficiently from a long-term perspective solely forthe pension beneficiaries” (Employees’ Pension Insurance
Act and National Pension Act) and “the pension reserve shallbe managed safely and efficiently” (Act on the Government
Pension Investment Fund). Accordingly, the most fundamental
legal requirement for management of the pension reserveis “safe and efficient management of pension reserve from along-term perspective.”
As is the case in other incorporated administrative agencies(Act on General Rules for Incorporated Administrative
Agencies), the relevant minister lays out the objectives of
GPIF for a set period of time. “Objectives to be achievedby GPIF” (hereinafter the “Medium-term Objectives”),
established by the Minister of Health, Labour and Welfare,stipulates that “GPIF is required to achieve a long-term real
return (net investment yield on the pension reserve less thenominal wage growth rate) of 1.7% with minimal risks, while
maintaining liquidity necessary for the pension payout, basedon the current status and outlook for pension finance.” In
light of these requirements, GPIF, in its Medium-term Plan,established the asset allocation (Policy Asset Mix) from a longterm perspective, on the premise of portfolio diversification,and carries out investment and management of pension
reserve based on the Policy Asset Mix.

(Note) For the revision of 2004 and the details of public pension scheme, refer to the website of the Ministry of Health, Labour and Welfare(https://www.mhlw.go.jp/index.html).

② Roles of reserve fund in pension finance
The reserve fund is to be used to stabilize pension finance. In
the current system that aims at balancing pension finance inabout 100 years, as mentioned above, a fiscal plan is drawn
up to use the pension reserve. Under this plan, investment
returns on the reserve fund should be paid as a part ofpension benefits initially. In addition to investment returns,
the accumulated fund will be gradually withdrawn, after
a set period of time. Ultimately, after 100 years or so, it isexpected to maintain a reserve fund equivalent to one yearof pension benefits. About 90 percent of the financial source
57

of pension benefits (the average of approximately 100 years
based on the assumption of financial verification) is fundedby pension premiums and government contributions for theyear, while the financial source obtained from the pension
reserve (reimbursement of trust money or payment to nationaltreasury) accounts for about 10 percent. GPIF owns a sufficient
reserve fund necessary for the payment of pension benefits,
and therefore short-term market fluctuations associated with
the investment of pension reserve do not affect payments
for beneficiaries.

[2] Key items of the Medium–term Objectives and the Medium–term Plan
① The Medium-term Objectives period
The Medium-term Objectives periods at GPIF are: a four-year

government conducts every five years on the public pension

period from fiscal 2006, when GPIF was established, to fiscal

scheme. This is based on the stipulation of the applicable law,2009 (the first cycle); a five-year period from fiscal 2010 towhich specifies GPIF’s policy asset mix should be established infiscal 2014 (the second cycle); and a five-year period from fiscal

consideration of financial verification and should be described2015 to fiscal 2019 (the third cycle). The final fiscal year of eachin the Medium-term Plan.

cycle corresponds to the year of financial verification that the② Basic Policy for Investment Management (ORIM)
The Employees’ Pension Insurance Act stipulates that pension

term perspective solely for the beneficiaries. The Act on thereserve funds, part of the premium collected from the pension

Government Pension Investment Fund provides that GPIF must

beneficiaries, are a valuable source of funding for future pension

consider the impact of the management of the reserve funds

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benefits, and the purpose of investing the reserve funds ison the markets and other private sector activities. The Mid-Term2

to contribute to the future stability of the public pension

Objectives of the GPIF also stipulate that GPIF is not allowed toscheme through stable and efficient management from a long-select individual stocks in equity investment.

○ Article 79–2 of the Employees’ Pension Insurance Act (the same philosophy is stipulated in Article 75 of the National
Pension Act)“... the pension reserve, a part of the premium collected from the pension beneficiaries, is a valuable source of funding
for future pension benefits and... the purpose of the fund is to contribute to the future stability of management of the
Employees’ Pension Insurance through stable and efficient management from a long–term perspective solely for thepension beneficiaries of the Employees’ Pension Insurance.”○ Article 20, Paragraph 2 of the Act on the Government Pension Investment Fund“... GPIF must consider generally recognized expertise and domestic and overseas macroeconomic trends, as well as
the impact of the pension reserve on the markets and other private sector activities, while avoiding concentration
on any particular style of investment. GPIF’s investment management should also satisfy the objectives under Article
79–2 of the Employees’ Pension Insurance Act and Article 75 of the National Pension Act.”

In light of these requirements, GPIF establishes the policy asset

Mutual Aid Associations, the Pension Fund Association formix in the Medium–term Plan from a long–term perspective,

Local Government Officials and the Promotion and Mutual Aid

based on the philosophy of diversified investment. Given the

Corporation for Private Schools of Japan.

standardization of employees’ pensions from October 2015,

In addition to the formulation and publication of the ORIM, thethe policy asset mix of the third Medium–term Plan took into

Medium–term Plan requires GPIF to review the ORIM at leastconsideration the Reference Portfolio established jointly byonce a year and revise it promptly as deemed necessary.

GPIF, the Federation of National Public Service Personnel

58Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme③ Investment objectives, risk management, improvements in transparency and others
The third Medium–term Objectives as well as the second
Medium–term Objectives, as revised in October 2014,
stipulate that a pension reserve must achieve a long–term real
return (net investment yield on the pension reserve less thenominal wage growth rate) of 1.7% with minimal risks, while
maintaining liquidity necessary for the pension payout, basedon the financial verification of the pension scheme. The third
Medium-term Objectives also require GPIF to make efforts
not to affect market pricing or investment activities by private
sectors, and to achieve the benchmark rate of return (market
average rate of return) for each asset class during the period
for the Medium-term Plan.
Regarding risk management for the pension reserve, it
stipulates GPIF shall maintain the diversified portfolio, andmanage and control risks of the overall portfolio, each asset
class, and each asset manager.

The third Medium–term Objectives started from April
2015 stipulates that GPIF shall combine passive and active
investments, implement active investment based on thestrong conviction of the excess return, taking historicalperformance into account, and consider non–financial factors,
including environmental, social and governance (ESG) issues,
to secure sustainable return.
In October 2017, the Board of Governors was established. The
Board of Governors is responsible for holding deliberations
and making decisions on important matters related to theintroduction of a new investment method, and other issues.
An outline of the deliberations at the Board of Governors is
promptly conducted upon obtaining approval of the Board, bymeans of which we hope to help improve the transparency of
GPIF’s organizational operation.

④ Other important matters for pension reserve management
The third Medium–term Objectives call for thoroughcompliance with the duty of care and fiduciary duty of prudent
experts.
When managing the pension reserve, GPIF is required toconsider the market size, take steps to prevent exposure
to unfavorable market impact, and avoid the extreme
concentration of investing and/or withdrawing at one time.
GPIF is further required to not exert undue influence on
corporate management but rather to take appropriate
measures such as exercising shareholders’ voting rights for
maximizing long–term returns to shareholders. In addition, it
stipulates that GPIF shall fulfill Stewardship Responsibilities

based on Japan’s Stewardship Code, and shall not selectindividual stocks itself, in consideration of the impact on
corporate management.
It also sets forth that GPIF should secure the liquidity necessary
for pension payouts by taking into consideration the outlook
for the pension finance and the status of revenues andexpenditures. At the same time, in order to enhance thefunctions necessary for assuring liquidity without shortage,
GPIF is expected to take appropriate measures including
selling assets in a smooth manner while giving consideration
to market price formation and other factors.

⑤ Enhancement of investment capabilities, improvement of operational efficiency
In the third Medium–term Objectives, GPIF is expected toclarify the expertise required of highly skilled professionals
and the area of operations requiring such expertise, whiledeveloping an appropriate environment for attracting suchtalent, implementing a periodical performance evaluation
system, and maintaining human resource in the most suitableway. It also stipulates that GPIF shall explain clearly to the
public the appropriateness of the remuneration level applied
to such highly skilled professionals by referring to comparable
ones in the private sector.
GPIF is also expected to develop a comprehensive portfolio
risk management system, including one specific to alternative
investment, with consideration paid to cost effectiveness. In
addition, it clarifies that GPIF shall make more sophisticatedrisk management by upgrading its forward–looking risk
analysis functions, risk analysis tools, information gatheringand research functions.

59

With regard to improvements in operational efficiency, theObjectives stipulate that the average cost savings during the
Medium–term Objectives period should be at least 1.34%
per annum based on the fiscal 2014 level. The cost-saving
target includes general administrative expenses (excluding
retirement allowances and office relocation expenses)
and operational expenses (excluding expenses related tocomputer systems, fees for external asset managers, personnel
expenses for highly skilled professionals, and expenses related
to short–term borrowing). Costs added or expanded pursuant
to the December 2013 Cabinet Office decision and similar
factors are excluded from the cost–saving target. However,
the additions and expansions are included in the 1.34% cost–saving target from the following fiscal year onward. The
Objectives also call for continued efforts to reduce fees forexternal asset managers, considering changes in the amountsof each invested assets.

Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System

2 Organization and Internal Control System[1] Governance framework
GPIF has adopted a governance framework in which the Boardof Governors, established in October 2017, operates on amajority vote decision-making system and has supervisory
powers to determine whether decisions are properly executed.
Three Governors concurrently serve as Auditors and form the
Audit Committee, of which one is a full-time member. The
Audit Committee carries out audits of GPIF’s operations. In
addition, the Audit Committee is entrusted by the Board ofGovernors with the authority to supervise the status of GPIF’s
operations executed by the President or Executive Managing
Directors. The President presides over GPIF’s operations inaccordance with the provisions of Article 7, Paragraph 1 of
the Act on the Government Pension Investment Fund. This
governance system, including the majority vote decisionmaking system, ensures the separation of decision-making
and supervision from the execution or implementation of saiddecisions.
The Board of Governors consists of 10 members: thePresident and nine professionals with an academicb a c k gro u n d or pra c ti ca l e xp e r i e nce i n e co no m i cs,
finance, asset management, business administration,and other fields relevant to GPIF’s operations. Important

decision-making carried out by the Board of Governors
includes development of the Policy Asset Mix and theMedium-term Plan, preparation of annual plans and annual
reports, and decisions on important matters related to theorganization such as staff size. It also includes the operationof GPIF, such as the formulation of basic policies for risk
management and internal control, the establishment oforganizational rules and other matters, approval of theappointment of the executive director. In fiscal 2019, theBoard of Governors will formulate the next Policy Asset Mix
based on the results of the financial verification conducted
every five years.
It has been a year and a half since our governance systemshifted from individual decision-making by the President
to a majority voting at the Board. The root of the word
“governance” is a Greek word meaning “steering.” It is essential
in the practice of governance to go beyond pro-forma
development to promote substantive reforms of governance,
and to carry out appropriate “steering” of the organization inan effort to make GPIF an organization worthy of greater trustfrom Japanese public.

Minister of Health, Labour and Welfare

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2

Social Security Council(The Committee of Pension FundManagement)

Design of Public Pension Schemes/
Actuarial Valuation of Pension Finance

Deliberation on the Medium-term Plan, etc.

Setting of and giving directions on the Medium-term Objectives (investment returns, etc.)
Approval of the Medium-term Plan and Statement of Operation Procedures, etc., evaluation of GPIF

GPIF
Councildecision-making
systemBoard of Governors• Comprised of experts in such fields as economics, finance, asset management andbusiness administration, and the President.
• Chairperson and governors are appointed by the Minister of Health, Labour and Welfare
other than the President.
• The Executive Managing Director (Management and Investment Operations) is allowed tostate opinions on relevant proposals.

Appointment

Decision-making on important policies,
including the Policy Asset Mix
State opinions/provide audit resultsAppointment

Audit

Audit Committee

Separation ofdecision-making
and supervisionfrom execution

Approval of
appointment of the
Executive Managing
Directors

Supervision of
execution

Comprised of the Governors appointed by the
Minister as qualified to be the Auditors

Audit and Monitoring

Appointment of the
President
Approval of the
Executive Managing
Director (Management
and Investment
Operations)Executive Office
Execution

60

Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System[2] Board of Governors
At meetings of the Board of Governors, experts in various
fields, such as economics, finance, asset management andbusiness administration, make an effort to discuss a broad
range of agenda items related to GPIF’s investment andoperation management from a multidimensional perspective
and make timely and appropriate decision-making. The Boardof Governors held a total of 13 meetings in fiscal 2018. An
outline of the meetings is as described in the following table.
In fiscal 2018, the Board of Governors performed a sweeping
review of the internal rules that form the backbone ofgovernance, and implemented necessary revisions from theperspective of improving transparency of the organization,such as the allocation of authorities between the Board ofGovernors and the Executive Office and within the Executive
Office, as well as clarifying the structure of regulations. In

addition, the Board of Governors deliberated and maderesolutions on important matters including periodic
verification of the Policy Asset Mix, review of operations,preparation of financial statements, etc., procurement of IT
systems that support GPIF’s operation, such as integrated
network and data service for investment decisions, from a
broad perspective including the improvement transparency,
appropriateness of investment activities, and the pros
and cons of budgetary provision. The Board of Governors
also received reports from Executive Office on numerous
important matters, such as issues on risk management and
ESG initiatives, and engaged in frank exchanges of views on
the content of reports. The details of discussion by the Boardof Governors are published later on the website of GPIF as asummary of agenda items.

Outline of Meetings of the Board of Governors
Fiscal 201861

Date of meeting

Main agenda items (only matters for resolution/deliberation are recorded)

9th meeting

Apr. 26, 2018

(Resolution) (i) Periodic Verification of the Policy Asset Mix, (ii) Change in the Standards for
Payment of Remuneration and Salaries

10th meeting

May. 28, 2018

(Deliberation) Annual Report Fiscal Year 2017 (draft)

11th meeting

Jun. 18, 2018

(Resolution) Important matters related to organization and staff size
(Deliberation) (i) Review of Operations in Fiscal 2017 (draft), (ii) Annual Report Fiscal Year 2017
(draft), (iii) Preparation of the financial statements, business report, and financial report for
Fiscal 2017, appropriation of profit and loss and other important matters related to accounting(draft)12th meeting

Jun. 28, 2018

(Resolution) (i) Review of Operations in Fiscal 2017 (draft), (ii) Annual Report Fiscal Year 2017
(draft), (iii) Disclosure of portfolio holdings by asset category (as of the end of March 2017), (iv)
Preparation of the financial statements, business report, and financial report for Fiscal 2017,
appropriation of profit and loss and other important matters related to accounting (draft)

13th meeting

Jul. 31, 2018

(Deliberation) Deviation limit management (2)14th meeting

Sep. 18, 2018

(Resolution) Change in the Annual Plan for Fiscal 2018

15th meeting

Oct. 15, 2018

(Deliberation) Reviewing existing regulations

16th meeting

Nov. 19, 2018

(Resolution) Procurement of integrated network(Deliberation) (i) Withdrawal and utilization of data for investment decisions, (ii) Reviewing
existing regulations (2)17th meeting

Dec. 17, 2018

(Resolution) (i) Change in the Standards for Payment of Remuneration, etc. and Salaries, etc.,(ii) Procurement of data service operations for investment decisions, etc.
(Deliberation) Reviewing existing regulations (3)18th meeting

Jan. 21, 2019

(Resolution) Reviewing existing regulations (4-1)(Deliberation) (i) Reviewing existing regulations (4-2), (ii) Reviewing existing regulations (5),(iii) Change of the Statement of Operation Procedures, (iv) Withdrawal and utilization of datafor investment decisions (2)19th meeting

Feb. 15, 2019

(Deliberation) (i) Reviewing existing regulations (6), (ii) Reviewing existing regulations (7), (iii)
Plan for commissioned research study for fiscal 2019 (draft)Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System

Date of meeting

Main agenda items (only matters for resolution/deliberation are recorded)

20th meeting

Mar. 7, 2019

(Resolution) (i) Change in the Statement of Operation Procedures, (ii) Reviewing existing
regulations (8-1), (iii) Reviewing existing regulations (9)(Deliberation) (i) Annual plan for fiscal 2019 (draft), (ii) Reviewing existing regulations (8-2)

21st meeting

Mar. 29, 2019

(Resolution) (i) Reviewing existing regulations (10), (ii) Annual plan for fiscal 2019 (draft)(Deliberation) Development of relevant regulations, etc. associated with change of era name[3] Audit Committee
The Audit Committee executes its duties through staff

investigation at times. Then the Audit Committee reports andmembers on the Secretariat for the Audit Committee, whoshares information obtained through these activities with theassist the duties of the Audit Committee and are independent

Board of Governors, and gives opinions to the Board and thefrom the President and Executive Managing Directors. The

President on organizational management issues such as ways

Audit Committee also coordinates closely with the Internal

to further strengthen internal controls.

Audit Department and the Account Auditor (Deloitte Touche

The Audit Committee held 19 meetings in fiscal 2018. The

Tohmatsu LLC). In addition, the Audit Committee attends

Committee performed audits primarily from five perspectives:

committee meetings organized by the Executive Office,the status of achievement of Medium-term Objectives; the

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including meetings of the Investment Committee, thestatus of execution of duties by the Board of Governors and2

Portfolio Risk Management Committee, the Management

Governors; the status of execution of duties by the President

and Planning Committee, the Procurement Committee, etc.,

and other executives and staff members; the status of theas needed. The Audit Committee assesses and analyzes theinternal control system following the change in governancestatus and appropriateness of GPIF’s operations throughstructure; and the status of accounting. The results of theseinterviews with the person in charge of each department,

audits are published as the Audit Report on GPIF’s website.

the President, and Executives Managing Directors as well as[4] Execution system① Organization
As of April 1, 2019, GPIF has 12 executives, consisting of thethe Research and Actuar y Depar tment, the Portfolio

Chairperson of the Board of Governors, eight Governors

Risk Management Department, the Information Security(including three Governors concurrently serving as Auditors),

Ad m i n i s t r a t i o n D e p a r t m e n t ( I n fo r m a t i o n S e c u r i t y

the President and two Executive Managing Directors (one for

Administration Division, IT Administration Division), thePlanning and General Affairs and the other for Management

Investment Strategy Department (Investment Strategy &and Investment Operations who is serving as the CIO), as well

ESG Division), the Investment Administration Department,

as 133 staff members (excepting part-time staff ).

the Public Market Investment Department (Public Market

The organization consists of the Secretariat for Board of

Investment Division, Stewardship & ESG Division), the Private

Governors, the Secretariat for Audit Committee, the General

Market Investment Department, the Internal Fixed Income

Affairs Department (General Affairs Division, Accounting

Investment Department, and the Internal Audit Department

Division), the Planning and Communication Department(to report directly to the President).

(Planning and Communication Division, Treasury Division),62

Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System

Organization Chart (as of April 1, 2019)

Secretariat for
Board of Governors

Board of Governors
Chairperson

Secretariat for
Audit Committee

Audit Committee

Governors
General Affairs
Department

President

General Affairs
Accounting

Executive Managing Director(Planning and General Affairs)

Chief ofstaff

Planning andCommunication
Department

Executive Managing
Director (CIO)

Planning andCommunication
Treasury

Research andActuary Department
Portfolio Risk
Management Department
Information Security
Administration
Department
Compliance Officer

Legal Officer

Investment Strategy
Department

Information Security
Administration
IT Administration

Investment Strategy & ESG

Investment
Administration
Department

Public Market
Investment Department

Public Market
Investment
Stewardship& ESG

Private Market
Investment Department
Internal Fixed Income
Investment Department
Internal Audit
Department② Internal control system

63

GPIF has put an internal control system in place in accordanceas well as fiduciary responsibility, etc., and the Compliancewith the Basic Policies of Internal Control established by the

Officer and the Legal Officer are appointed. All executives

Board of Governors.

and staff members are informed of the necessity to comply

Specifically, regarding the system to ensure that thewith the Investment Principles and the Code of Conduct

execution of duties by the President, Executive Managing

and act as an organization worthy of the trust of the public.

Directors, and staff members complies with laws andA whistle blowing system is also in place, and corrective

regulations, the Internal Control Committee is establishedactions and preventive measures shall be taken according

to promote internal control. In addition, the Complianceto our internal rules whenever an illegal or inappropriate

Committee is established under the Internal Control

activity is (or is expected to be) perpetrated by executives

Committee to ensure compliance with laws and regulations

or staff members of GPIF. In addition, the Internal AuditRoles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System

Department is established to conduct internal auditing ofrisk factors, prevent risks, and minimize losses in the event of

GPIF’s operations and related responsibilities.

risk occurrence.

Regarding the management of the risk of losses of otherIn addition to the above, the Information Security Committee

related systems, the Portfolio Risk Management Committee

promotes GPIF’s information security measures, thehas been established to appropriately monitor and handle

Management and Planning Committee carries out priorvarious risks (portfolio risks) caused during the pension

deliberation to make decisions on important matters related

management. The Internal Control Committee has been

to execution of GPIF’s operations, and the Investment

established to identify, analyze, and assess operational risks

Committee conducts prior deliberations for making decisions

that could impede GPIF’s day-to-day operations as well as

on important matters related to investment management. By

to take measures against those risks. The Internal Control

these committees, GPIF is committed to establish its internalCommittee also conducts risk management by drawing up

control system.

and promoting measures necessary to be constantly aware ofConcept of Internal Control
Minister of Health, Labour and Welfare
The Committee of Pension
Fund Management
Consultation

Medium-term objectives
Preparation,
instruction

GPIF

C
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(Design of Public Pension Schemes/Actuarial Valuation of Pension Finance)

Performance
evaluation

Consultation Approval

Demanding corrective measures
Appointment of President and Governors(Chairperson and Governors[including Auditors])

Medium-term plan

Audit

Board of Governors
Consent

Annual plan

Participation
Supervisionof execution

Approval

Reports, opinions

2

Audit Committee
Audit
and
Monitoring

Secretariat for
Board of Governors

Secretariat for
Audit Committee

Board of Audit

Reports

Audit

President
Appointment

Executive Managing Director(Planning and General Affairs)

Account Auditor
External audit*2
Internal Audit Dept.

Internal Fixed Income
Investment Dept.

Private Market
Investment Dept.

Public Market
Investment Dept.

Chief Information
Security Officer

Investment
Administration Dept.

System for retention and management of
information concerning the execution of duties
Information Security
Committee

Investment Strategy Dept.

Compliance Committee

Executive Managing Director(Management and Investment Operations)/CIO

Information Security
Administration Dept.

Internal Control Committee

Portfolio Risk
Management Dept.

Research and Actuary Dept.

Planning andCommunication Dept.

General Affairs Dept.

System to ensure legal and regulatorycompliance in the execution of duties*1

System to secure the efficiency
in the execution of duties
Management andInvestment Committee
Planning Committee
Procurement
Committee

Contract Monitoring
Committee

CIO (Chief Investment Officer)

Compliance Officer
Risk of losses management system

Whistle-blowing liaison[Legal Counsel]

Legal Officer

Internal Control Committee

Information Systems Committee

Whistle-blowing system

Portfolio Risk Management
Committee

Chief Information Officer

Sanctions Committee
Disciplinary Committee

Reliability ensuring system including financial reporting
Tripartite Audit Committee(Audit Committee, Account Auditor, Audit Office)*1 The Executive Managing Director (Planning and General Affairs) is responsible for matters related to the General Affairs Department, the Planning andCommunication Department, the Research and Actuary Department, the Portfolio Risk Management Department, and the Information Security
Administration Department.
*2 The Executive Managing Director (Management and Investment Operations)/CIO is responsible for matters related to the Investment Strategy Department, theInvestment Administration Department, the Public Market Investment Department, the Private Market Investment Department, and the Internal Fixed Income
Investment Department.

64Chapter 3

Reference Data

Investment Assets by Investment Method and by Manager, Etc.
[1] Investment assets by investment method and by asset class (market value at the end of fiscal 2018)
Market value (¥billion)

Portfolio allocation

Total (Investment assets)

159,215.4

100.00%

Total
MarketPassive investments
investments
Active investments

158,319.1

99.44%

123,286.2

77.43%

35,032.8

22.00%

896.3

0.56%

FILP bonds

Market value (¥billion)

Portfolio allocation

Total (Investment assets)

159,215.4

100.00%Total

42,266.4

26.55%

Passive investments

31,927.0

20.05%

Active investments

10,339.5

6.49%

Total

38,655.6

24.28%

Passive investments

35,015.1

21.99%

Active investments

3,640.5

2.29%

Total

27,818.7

17.47%

Passive investments

18,426.6

11.57%

Active investments

9,392.1

5.90%

Total

41,897.5

26.32%

Passive investments

37,917.6

23.82%

Active investments

3,980.0

2.50%

Short-term assets (Active investments)

7,680.8

4.82%

FILP bonds

896.3

0.56%

Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities(Note 1) The figure in the market value column for FILP bonds includes accrued income in the book value amountbased on the amortized cost method.
(Note 2) The figures above are rounded, so the sum of each item does not necessarily match the total number.

[2] Changes in the ratios of passive and active investment (market investments)( Unit: % )FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017

Domestic
bonds

Passive

50.67

61.36

75.47

78.58

79.88

77.97

80.87

82.26

83.09

82.05

81.61

90.48

90.13

86.10

82.50

79.38

77.03

75.54

Active

49.33

38.64

24.53

21.42

20.12

22.03

19.13

17.74

16.91

17.95

18.39

9.52

9.87

13.90

17.50

20.62

22.97

24.46

Domestic
equities

Passive

44.24

70.84

77.02

76.87

76.19

76.27

76.41

75.73

75.26

75.26

76.23

78.78

87.69

86.71

81.52

90.62

90.44

90.58

Active

55.76

29.16

22.98

23.13

23.81

23.73

23.59

24.27

24.74

24.74

23.77

21.22

12.31

13.29

18.48

9.38

9.56

9.42

Foreignbonds

Passive

71.42

76.85

73.30

72.45

72.04

71.91

72.31

71.71

70.93

70.62

70.87

70.60

71.70

69.85

64.94

60.89

61.98

66.24

Active

28.58

23.15

26.70

27.55

27.96

28.09

27.69

28.29

29.07

29.38

29.13

29.40

28.30

30.15

35.06

39.11

38.02

33.76

Foreignequities

Passive

53.25

79.03

81.56

79.86

79.69

79.85

82.94

85.35

85.59

86.23

86.01

86.74

89.37

88.05

84.15

86.45

86.32

90.50

Total

65

FY2018

Active

46.75

20.97

18.44

20.14

20.31

20.15

17.06

14.65

14.41

13.77

13.99

13.26

10.63

11.95

15.85

13.55

13.68

9.50

Passive

50.07

65.54

74.89

77.78

78.06

77.22

79.53

80.47

79.67

78.13

76.65

84.50

86.00

83.91

79.28

77.31

76.28

77.87

Active

49.93

34.46

25.11

22.22

21.94

22.78

20.47

19.53

20.33

21.87

23.35

15.50

14.00

16.09

20.72

22.69

23.72

22.13

[3] Investment assets by manager, etc. (market value at the end of fiscal 2018)(Unit: ¥billion)
Investment
methodDomestic
bonds passive
investment

Domestic
bonds
activeinvestment

ManagerbenchmarkMarketvalue

Asset Management One Co., Ltd.
(former Mizuho Trust & Banking)BPI

1,158.4

State Street Global Advisors (Japan) Co., Ltd.

BPI

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ(Unit: ¥billion)
ManagerbenchmarkMarketvalue

Asset Management One Co., Ltd.
(former Mizuho Trust & Banking)

WGBI

1,902.9

1,296.8

State Street Global Advisors (Japan) Co., Ltd.

WGBI

1,945.4

BPI

1,297.2

Nomura Asset Management Co., Ltd.

WGBI

2,476.0

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ

BPI-G

3,252.5

BlackRock Japan Co., Ltd.Ⅰ

WGBI

0.6

Mitsubishi UFJ Trust and Banking Corporation

BPI-G

1,608.8

BlackRock Japan Co., Ltd. Ⅱ

WGBI

2,520.6In-house investmentⅠ

BPI

1,367.1

BlackRock Japan Co., Ltd. Ⅲ

WGBI-O30.9

In-house investment Ⅱ

BPI-G

9,346.2

BlackRock Japan Co., Ltd. Ⅳ

USGOV

1,038.6

BlackRock Japan Co., Ltd. Ⅴ

USGOV-H

303.3

BlackRock Japan Co., Ltd. Ⅵ

USGOV
1-3Y

255.3

BlackRock Japan Co., Ltd. Ⅶ

EGBI

0.2

BlackRock Japan Co., Ltd. Ⅷ

EGBI

504.7

Asset manager name (Subcontractor, etc.)

Investment
methodAsset manager name (Subcontractor, etc.)

In-house investment Ⅲ

BPI-C

12,599.9

Asset Management One Co., Ltd. (former DIAM)ⅠBPI-TIPS

1,105.1

Asset Management One Co., Ltd.
(former Mizuho Trust & Banking) Ⅱ

BPI-TIPS

950.9

MU Investments Co., Ltd.

BPI-TIPS

709.9

Tokio Marine Asset Management Co., Ltd.

BPI-TIPS

947.8

BlackRock Japan Co., Ltd. Ⅸ

EGBI-H

290.4

PGIM Japan Co., Ltd.

BPI-TIPS

639.0

Sumitomo Mitsui Trust Asset Management Co., Ltd.

WGBI

1,904.9

PIMCO Japan Ltd(Pacific Investment Management Company LLC (PIMCO), etc.)

BPI-TIPS

551.2

Resona Bank, Limited.Ⅰ

WGBI

2,026.1

Manulife Asset Management (Japan) Limited

BPI-TIPS

427.5

Resona Bank, Limited. Ⅱ

WGBI-O

63.2

Sumitomo Mitsui Trust Asset Management Co., Ltd.

BPI-TIPS

955.4

Resona Bank, Limited. Ⅲ

USGOV

1,176.0

Mitsubishi UFJ Trust and Banking Corporation

BPI-TIPS

949.3

Resona Bank, Limited. Ⅳ

USGOV-H

284.9

USGOV
1-3Y

309.4
1,014.9

Foreignbonds
passiveinvestment-

3,035.4

Resona Bank, Limited. Ⅴ

Asset Management One Co., Ltd. (former DIAM)Ⅰ

TOPIX

9,099.2

Resona Bank, Limited. Ⅵ

EGBI

Asset Management One Co., Ltd. (former DIAM) Ⅱ

JPX

525.0

Resona Bank, Limited. Ⅶ

EGBI-H

378.2

Asset Management One Co., Ltd.
(former Mizuho Trust & Banking) Ⅲ

RN-P

1,564.8

Asset Management One Co., Ltd. (former DIAM)Ⅰ(Janus Capital Management LLC)

USAGG

506.0

Asset Management One Co., Ltd. Ⅳ

Asset Management One Co., Ltd.
(former Mizuho Asset Management) Ⅱ(Loomis, Sayles & Company, L.P.)

G-AGG

583.0

Ashmore Japan Co., Ltd(Ashmore Investment Management Limited)

GBIEMGD

223.6

AllianceBernstein Japan Ltd.
(AllianceBernstein L.P., etc.)

EMBIGD

94.8

Goldman Sachs Asset Management Co., Ltd.
(Goldman Sachs Asset Management, L.P., etc.)

G-AGG

276.2

G-AGG

531.6

Sompo Japan Nipponkoa Asset Management Co., Ltd.
(Colchester Global Investors Limited)

G-AGG

730.7

Nomura Asset Management Co., Ltd.Ⅰ(Franklin Advisers, Inc.)

G-AGG

722.0

Nomura Asset Management Co., Ltd. Ⅱ(Nomura Corporate Research & Asset Management Inc.)

USHY2%

139.5

BNY Mellon Asset Management Japan Limited(Insight Investment Management (Global) Limited)

EUROAGG

519.9

In-house investment

Domestic
equities
passiveinvestment

FTSE-BL

230.4

Goldman Sachs Asset Management Co., Ltd.
(Goldman Sachs Asset Management, L.P., etc.)

SP-G

1,945.6

Nomura Asset Management Co., Ltd.

RAFI

1,753.5

FIL Investments (Japan) Limited(Geode Capital Management, LLC)

TOPIX

98.2

BlackRock Japan Co., Ltd.Ⅰ

TOPIX

5,630.0

BlackRock Japan Co., Ltd. Ⅱ

MSCI-J

0.6

BlackRock Japan Co., Ltd. Ⅲ

FTSE-BL

412.4

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ

TOPIX

3,656.1

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ

JPX

566.4

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

SP-C

387.8

Mitsubishi UFJ Trust and Banking CorporationⅠ

TOPIX

6,066.2

Schroder Investment Management (Japan) Limited(Schroder Investment Management Limited, etc.)

Foreignbonds
activeinvestment

Mitsubishi UFJ Trust and Banking Corporation Ⅱ

JPX

817.4

Mitsubishi UFJ Trust and Banking Corporation Ⅲ

MSCIESG

804.3

Mitsubishi UFJ Trust and Banking Corporation Ⅳ

MSCIWIN

474.6

PGIM Japan Co., Ltd.
(PGIM, Inc. etc.)

G-AGG

809.8

Resona Bank, Limited.

TOPIX

982.5

Asset Management One Co., Ltd. (former DIAM)Ⅰ

TOPIX

595.6

PIMCO Japan Ltd(Pacific Investment Management Company LLC (PIMCO), etc.)

G-AGG

788.8

101.8

FIL Investments (Japan) Limited(Fidelity Institutional Asset Management)

USAGG

542.8

170.5

BlackRock Japan Co., Ltd.
(BlackRock Financial Management, Inc., etc.)

G-AGG

447.6

Asset Management One Co., Ltd.
(former Mizuho Asset Management) Ⅱ
Eastspring Investments Limited(Eastspring Investments (Singapore) Limited)

RN-SG
TOPIX

Invesco Asset Management (Japan) Limited

TOPIX

221.7

Manulife Asset Management (Japan) Limited(Manulife Asset Management (US) LLC)

G-AGG

722.8

Capital International K.K.
(Capital International, Inc.)

TOPIX

471.3

Morgan Stanley Investment Management (Japan) Co., Ltd.
(Morgan Stanley Investment Management, Inc., etc.)

G-AGG

710.0

RN-V

371.5

TOPIX

276.2

UBS Asset Management Japan Ltd(UBS Asset Management (UK) Ltd)EUROHY2%

158.7

Legg Mason Asset Management Japan Co., Ltd.
(Brandywine Global Investment Management, LLC)

G-AGG

596.2

JPMorgan Asset Management (Japan) Ltd.
Domestic
equities active Schroder Investment Management (Japan) Limited
investment
Daiwa SB Investments Ltd.

RN-V

377.7

Nikko Asset Management Co., Ltd.

TOPIX

205.9

Nomura Asset Management Co., Ltd.Ⅰ

RN-S

56.2

Nomura Asset Management Co., Ltd. Ⅱ(Dimensional Fund Advisors LP)

MSCI-JS

241.5

FIL Investments (Japan) Limited

TOPIX

352.1

Russell Investments Japan Co., Ltd.
(Russell Investments Implementation Services, LLC.)

TOPIX

187.8

C
h
a
p
t
e
r

3

66

Reference Data ｜ Inves tm ent A ss e t s by Inves tm ent M e tho d and by M anag er, Etc .

(Unit: ¥billion)
Investment
methodForeignequities
passiveinvestment

Foreignequities
activeinvestment

Alternative
infrastructure

Alternative
private equity
Alternative
real estate
Short-term
assetsManagerbenchmarkMarketvalue

State Street Global Advisors (Japan) Co., Ltd.Ⅰ

MSCI-A

17,739.0

State Street Global Advisors (Japan) Co., Ltd. Ⅱ

MSCI - N

1,290.3

State Street Global Advisors (Japan) Co., Ltd. Ⅲ

MSCI - EU

417.0

State Street Global Advisors (Japan) Co., Ltd. Ⅳ

MSCI - P

83.8

State Street Global Advisors (Japan) Co., Ltd. Ⅴ

MSCI-EXC

44.5

Asset manager name (Subcontractor, etc.)

State Street Global Advisors (Japan) Co., Ltd. Ⅵ

SP-GC

1,205.2

BlackRock Japan Co., Ltd.

MSCI-A

2,714.7

Sumitomo Mitsui Trust Asset Management Co., Ltd.

MSCI-A

9,029.9

Legal & General Investment Management Japan KK(Legal & General Investment Management Limited)

MSCI-A

5,373.0

Resona Bank, Limited.

MSCI-A

20.0

Asset Management One Co., Ltd.
(former Mizuho Asset Management)(Wells Capital Management, Inc.)

MSCI-E

98.2

MFS Investment Management K.K.
(Massachusetts Financial Services Company)

MSCI-K

624.1

Nikko Asset Management Co., Ltd.
(INTECH Investment Management LLC)

MSCI-K

Nomura Asset Management Co., Ltd.
BNY Mellon Asset Management Japan Limited(Walter Scott & Partners Limited)
Mitsubishi UFJ Trust and Banking Corporation(Baillie Gifford Overseas Limited)

MSCI-K

UBS Asset Management (Japan) Ltd(UBS Asset Management (UK) Ltd)
Lazard Japan Asset Management K.K.
(Lazard Asset Management LLC)

Total

Nomura ResearchInstitute, Ltd.

BPI-G

Nomura-BPI government bonds

Nomura ResearchInstitute, Ltd.

BPI-TIPS

Nomura-BPI plus Inflation-Linked bonds

Nomura ResearchInstitute, Ltd.

888.0

BPI-C

NOMURA-BPI/GPIF Customized

MSCI-E

110.3

TOPIX

TOPIX (incl. dividends)

MSCI-K

489.3

JPX

JPX-Nikkei Index 400 (incl. dividends)

750.9

RN-P

RUSSELL/NOMURA Prime Index (incl. dividends)

MSCI-K

888.2

RN-V

MSCI-E

62.2

DBJ Asset Management Co., Ltd.

—

13.4

Gatekeeper : Nomura Asset Management Co., Ltd.
Fund of Funds Manager : Pantheon

—

37.4

Gatekeeper : Sumitomo Mitsui Asset Management Company,
LimitedFund of Funds Manager : StepStone Infrastructure & Real
Assets—98.0

In-house investment(Unit Trust Manager : Nissay Asset Management Corporation)

—

144.8

In-house investment(Unit Trust Manager : Nissay Asset Management Corporation)

—

14.3

Gatekeeper : Asset Management One Co., Ltd.
Fund of Funds Manager : CBRE Global Investment Partners
Limited—54.5

Mitsubishi UFJ Trust and Banking Corporation

—

70.4

In-house investmentⅠ—

7,628.5In-house investment Ⅱ

—

52.3

—

158,316.1

In-house investment

—

896.3

34 companies, 115 Funds—

159,212.4(Unit: ¥billion)

Custody

Custodian, etc. name
Trust & Custody Services Bank, Ltd. (Domestic bonds, Short-term assets)
State Street Trust and Banking Co., Ltd.
(Foreign bonds, Alternative assets, Short-term assets)
Japan Trustee Services Bank, Ltd. (Domestic equities)
The Master Trust Bank of Japan, Ltd.
(Domestic equities, Foreign bonds, Foreign equities)

Total

BlackRock Japan Co., Ltd. (Foreign bonds)(BlackRock Asset Management North Asia Limited)BlackRock Japan Co., Ltd. (Foreign equities)(BlackRock Asset Management North Asia Limited)

Russell Investments Japan Co., Ltd. (Foreign equities)(Russell Investments Implementation Services, LLC.)
Total

67

Marketvalue
50,723.3
20,596.3
37,564.3
50,329.6
159,213.6

Russell Investments Japan Co., Ltd. (Domestic equities)(Russell Investments Implementation Services, LLC.)
Transition
management

Source of benchmark

NOMURA-BPI (excluding ABS)Investment
methodManager benchmark
BPI

Subtotal
FILP bonds(Note1) The figure in the market value column for FILP bonds includes accrued
income in the book value amount based on the amortized cost method.
(Note2) While the 34 asset managers in the total column do not include in-house
investment, the 115 funds in the total column include nine in-house
investment funds.
(Note3) The figure in the total market value column for funds managed by asset
managers (115 funds managed by 34 managers) does not include
accrued dividend income from closed funds (statutory trust accounts).
(Note4) Figures in the market value column for custodians do not include accrued
dividend income (foreign equities: ¥1.7 billion) from closed funds(statutory trust accounts).
(Note5) Manager benchmarks are shown in the table below and the sources of
those benchmarks are as listed in the right-hand column of the tablebelow.

0.1
0.6
0.1
0.3
1.2

Domestic
bonds

RN-S

Domestic
equities

RN-SG
MSCI-J
MSCI-JS

Nomura Securities
Co., Ltd.
Tokyo Stock
Exchange, Inc.
Tokyo Stock
Exchange, Inc.

Nomura ResearchInstitute, Ltd.
Nomura Research
RUSSELL/NOMURA Large Cap Value Index (incl. dividends)
Institute, Ltd.
Nomura Research
RUSSELL/NOMURA Small Cap Index (incl. dividends)
Institute, Ltd.
RUSSELL/NOMURA Small Cap Growth Index (incl.
dividends)
MSCI Japan Standard (incl. dividends)
MSCI Japan Small (incl. dividends)

Nomura ResearchInstitute, Ltd.
MSCI G.K.
MSCI G.K.

MSCI-ESG MSCI Japan ESG Select Leaders Index
MSCI-WIN MSCI Japan Empowering Women Index (WIN)MSCI G.K.
MSCI G.K.

FTSE-BLFTSE Blossom Japan Index

FTSE International
Limited

SP-C
SP-G

S&P/JPX Carbon Efficient Index (JPY basis)
S&P GIVI Japan (Gross Total Return)

RAFI

Nomura RAFI reference Index

FTSE World Government Bond Index
WGBI(not incl. JPY, no hedge/JPY basis)
FTSE World Government Bond Index (not incl. JPY,WGBI-O
USD, EMU Government Bond, no hedge/JPY basis)
FTSE US Government Bond Index (no hedge/JPY
USGOVbasis)FTSE US Government Bond Index (JPY hedged/JPY
USGOV-Hbasis)USGOV FTSE US Government Bond Index 1–3years (no1-3Yhedge/JPY basis)
FTSE EMU Government Bond Index (no hedge/JPY
EGBI
basis)FTSE EMU Government Bond Index (JPY hedged/
EGBI-HJPY basis)
ForeignBloomberg Barclays Global Aggregate Index
bonds
G-AGG
(not incl. JPY, no hedge/JPY basis)
Bloomberg Barclays US Aggregate Index
USAGG(no hedge/JPY basis)
Bloomberg Barclays EURO Aggregate Index
EUROAGG(no hedge/JPY basis)
Bloomberg Barclays U.S. Corporate High Yield
USHY2%
2% Issuer Capped Bond Index (no hedge/JPY basis)
Bloomberg Barclays EURO Corporate High Yield
EUROHY2%
2% Issuer Capped Bond Index (no hedge/JPY basis)
J.P. Morgan Government Bond Index-Emerging
GBI-EMGD Markets Global Diversified Index (no hedge/JPY
basis)
J.P. Morgan EMBI Global Diversified (no hedge/JPY
EMBIGDbasis)MSCI ACWI (not incl. JPY, China A, JPY basis, incl.
MSCI-A dividends, after taking into account our dividend
tax factors)
MSCI KOKUSAI (JPY basis, incl. dividends,
MSCI-K
after taking into account our dividend tax factors)
MSCI North America(JPY basis, incl. dividends, after
MSCI-Ntaking into account our dividend tax factors)
MSCI Europe & Middle East(JPY basis, incl.
Foreign MSCI - EU dividends, after taking into account our dividend
tax factors)
equities
MSCI Pacific(not incl. JPY, JPY basis, incl. dividends,
MSCI-Pafter taking into account our dividend tax factors)
MSCI EMERGING MARKETSMSCI-E(JPY basis, incl. dividends, after deducting taxes)
MSCI EMERGING MARKETS (not incl. China A, JPY
MSCI-EXC
basis, incl. dividends, after deducting taxes)
S&P Global Ex-Japan LargeMidCap Carbon Efficient
SP-GC
Index

S&P Opco, LLC
S&P Opco, LLC
Nomura AssetManagement Co., Ltd.
FTSE Fixed Income LLC
FTSE Fixed Income LLC
FTSE Fixed Income LLC
FTSE Fixed Income LLC
FTSE Fixed Income LLC
FTSE Fixed Income LLC
FTSE Fixed Income LLC
Bloomberg Index
Services Limited
Bloomberg Index
Services Limited
Bloomberg Index
Services Limited
Bloomberg Index
Services Limited
Bloomberg Index
Services Limited
J.P. Morgan Securities
LLC
J.P. Morgan Securities
LLC
MSCI G.K.
MSCI G.K.
MSCI G.K.
MSCI G.K.
MSCI G.K.
MSCI G.K.
MSCI G.K.
S&P Opco, LLC

Reference Data ｜ Inves tm ent A ss e t s by Inves tm ent M e tho d an d by M anag er, Etc .

[4] Investment performance by manager, etc.
① Investment performance (over the last year) (from April 2018 to March 2019)
Investment
methodDomestic
bonds passive
investmentt

Domestic
bonds active
investment

Domestic
equities
passiveinvestment

Asset manager nameBenchmark return(B)

Excess rate of return(C)=(A)–(B)

Asset Management One Co., Ltd. (former Mizuho Trust & Banking)

1.89%

1.89%

−0.00%

State Street Global Advisors (Japan) Co., Ltd.

1.92%

1.89%

+0.02%

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ

1.92%

1.89%

+0.02%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ

2.05%

2.04%

+0.01%

Mitsubishi UFJ Trust and Banking Corporation

2.03%

2.04%

−0.01%

In-house investmentⅠ

1.94%

1.89%

+0.05%

In-house investment Ⅱ

2.07%

2.04%

+0.03%

In-house investment Ⅲ

0.78%

0.76%

+0.02%

Asset Management One Co., Ltd. (former DIAM)Ⅰ

1.97%

1.87%

+0.10%

Asset Management One Co., Ltd. (former Mizuho Trust & Banking) Ⅱ

1.98%

1.87%

+0.11%+0.28%MU Investments Co., Ltd.

2.14%

1.87%

Tokio Marine Asset Management Co., Ltd.

1.92%

1.87%

+0.05%PGIM Japan Co., Ltd.

1.98%

1.87%

+0.11%−0.09%PIMCO Japan Ltd

1.78%

1.87%

Manulife Asset Management (Japan) Limited

2.65%

1.87%

+0.78%

Sumitomo Mitsui Trust Asset Management Co., Ltd.

2.06%

1.87%

+0.19%+0.04%

Mitsubishi UFJ Trust and Banking Corporation

1.91%

1.87%

In-house investment−1.05%——

Asset Management One Co., Ltd. (former DIAM)Ⅰ−5.04%−5.04%−0.01%−0.02%

Asset Management One Co., Ltd. (former DIAM) Ⅱ−4.34%−4.32%

Asset Management One Co., Ltd. (former Mizuho Trust & Banking) Ⅲ−4.79%−4.83%+0.05%

Asset Management One Co., Ltd. Ⅳ−5.97%−5.99%+0.01%+0.07%

Goldman Sachs Asset Management Co., Ltd.

−3.87%−3.94%

Nomura Asset Management Co., Ltd.

−5.48%−5.48%−0.00%FIL Investments (Japan) Limited−1.02%−0.97%−0.05%

BlackRock Japan Co., Ltd.Ⅰ−5.04%−5.04%−0.00%

BlackRock Japan Co., Ltd. Ⅱ−3.41%−3.40%−0.02%

BlackRock Japan Co., Ltd. Ⅲ−6.03%−5.99%−0.04%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅰ−5.09%−5.04%−0.05%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ−4.35%−4.32%−0.03%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ−8.89%−8.88%−0.01%

Mitsubishi UFJ Trust and Banking CorporationⅠ−5.07%−5.04%−0.03%

Mitsubishi UFJ Trust and Banking Corporation Ⅱ−4.36%−4.32%−0.04%

Mitsubishi UFJ Trust and Banking Corporation Ⅲ−2.87%−2.75%−0.11%

Mitsubishi UFJ Trust and Banking Corporation Ⅳ−3.41%−3.37%−0.04%

Resona Bank, Limited.

−1.01%−0.97%−0.04%

Asset Management One Co., Ltd. (former DIAM)Ⅰ−7.75%−5.04%−2.71%

Asset Management One Co., Ltd. (former Mizuho Asset Management) Ⅱ−6.49%−8.67%+2.18%

Eastspring Investments Limited−9.26%−7.32%−1.94%

Invesco Asset Management (Japan) Limited

2.02%−5.04%+7.06%

Capital International K.K.

−4.88%−5.04%+0.16%

JPMorgan Asset Management (Japan) Ltd.

−6.10%−3.64%−2.46%+1.22%

Domestic
Schroder Investment Management (Japan) Limited
equities active
SEIRYU Asset Management Ltd.
investment
Daiwa SB Investments Ltd.

Foreignbonds
passiveinvestment

Time-weighted return(A)−3.81%−5.04%−11.93%−3.85%−8.08%−7.55%−3.64%−3.91%

Nikko Asset Management Co., Ltd.

−8.04%−7.32%−0.72%

Nomura Asset Management Co., Ltd.Ⅰ−12.49%−7.97%−4.52%+6.98%

Nomura Asset Management Co., Ltd. Ⅱ−3.84%−10.82%FIL Investments (Japan) Limited−10.38%−5.04%−5.34%

Russell Investments Japan Co., Ltd.

−7.03%−5.04%−2.00%+0.02%

Asset Management One Co., Ltd. (former Mizuho Trust & Banking)

2.48%

2.46%

State Street Global Advisors (Japan) Co., Ltd.

2.47%

2.46%

+0.01%

Nomura Asset Management Co., Ltd.

2.47%

2.46%

+0.01%+0.02%

Remarkscolumn

○

○

○

C
h
a
p
t
e
r

3

BlackRock Japan Co., Ltd.Ⅰ

2.86%

2.84%

BlackRock Japan Co., Ltd. Ⅱ

6.85%

6.82%

+0.03%

BlackRock Japan Co., Ltd. Ⅲ−0.57%−0.56%−0.01%○

BlackRock Japan Co., Ltd. Ⅳ

1.86%

1.86%

+0.01%○

BlackRock Japan Co., Ltd. Ⅴ−4.26%−4.27%+0.00%

BlackRock Japan Co., Ltd. Ⅵ

2.83%

2.80%

+0.04%○

BlackRock Japan Co., Ltd. Ⅶ

3.35%

3.32%

+0.03%○

BlackRock Japan Co., Ltd. Ⅷ

4.04%

3.93%

+0.11%○

Sumitomo Mitsui Trust Asset Management Co., Ltd.

2.50%

2.46%

+0.04%+0.04%

Resona Bank, Limited.Ⅰ

2.50%

2.46%

Resona Bank, Limited. Ⅱ

6.88%

6.89%

−0.01%

Resona Bank, Limited. Ⅲ

4.65%

4.67%

−0.02%

Resona Bank, Limited. Ⅳ−2.55%−2.64%+0.09%

Resona Bank, Limited. Ⅴ

1.03%

0.99%

+0.04%○

Resona Bank, Limited. Ⅵ

2.90%

2.89%

+0.01%○

Resona Bank, Limited. Ⅶ

4.11%

4.06%

+0.05%○○

68

Reference Data ｜ Inves tm ent A ss e t s by Inves tm ent M e tho d and by M anag er, Etc .

Investment
methodForeignbonds
activeinvestment

Foreignequities
passiveinvestment

Foreignequities
activeinvestment

Asset manager nameTime-weighted return(A)

Benchmark return(B)

Excess rate of return(C)=(A)–(B)−0.21%

Asset Management One Co., Ltd. (former DIAM)Ⅰ

8.53%

8.74%

Asset Management One Co., Ltd. (former Mizuho Asset Management) Ⅱ

3.79%

4.03%

−0.24%

Ashmore Japan Co., Ltd−4.35%−3.81%−0.54%

AllianceBernstein Japan Ltd.

6.17%

8.46%

−2.29%

Goldman Sachs Asset Management Co., Ltd.

4.40%

4.03%

+0.37%

Schroder Investment Management (Japan) Limited

3.17%

4.03%

−0.86%

Sompo Japan Nipponkoa Asset Management Co., Ltd.

1.92%

4.03%

−2.12%

Nomura Asset Management Co., Ltd.Ⅰ

5.33%

4.03%

+1.29%

Nomura Asset Management Co., Ltd. Ⅱ

9.13%

10.25%−1.12%−0.26%BNY Mellon Asset Management Japan Limited−3.16%−2.91%PGIM Japan Co., Ltd.

5.20%

4.03%

+1.17%PIMCO Japan Ltd

4.40%

4.03%

+0.37%FIL Investments (Japan) Limited

9.47%

8.74%

+0.73%

BlackRock Japan Co., Ltd.

3.36%

4.03%

−0.67%

Manulife Asset Management (Japan) Limited

2.72%

4.03%

−1.31%Morgan Stanley Investment Management (Japan) Co., Ltd.

3.27%

4.03%

−0.76%UBS Asset Management (Japan) Ltd.

−3.13%−3.22%+0.09%

Legg Mason Asset Management (Japan) Co., Ltd.

−0.78%

4.03%−4.81%

State Street Grobal Advisors (Japan) Co., Ltd.Ⅰ

8.15%

8.20%

−0.05%

State Street Grobal Advisors (Japan) Co., Ltd. Ⅱ−0.47%−0.45%−0.02%

State Street Grobal Advisors (Japan) Co., Ltd. Ⅲ

6.54%

6.59%

−0.05%

State Street Grobal Advisors (Japan) Co., Ltd. Ⅳ

8.35%

8.41%

−0.06%

State Street Grobal Advisors (Japan) Co., Ltd. Ⅴ−7.36%−7.44%+0.08%

State Street Grobal Advisors (Japan) Co., Ltd. Ⅵ−4.31%−4.22%−0.09%

BlackRock Japan Co., Ltd.

6.63%

6.69%

−0.06%

Sumitomo Mitsui Trust Asset Management Co., Ltd.

9.36%

9.42%

−0.07%

Legal & General Investment Management Japan KK−1.10%−1.09%−0.01%

Resona Bank, Limited.

1.95%

1.98%

−0.03%+2.21%

Asset Management One Co., Ltd. (former Mizuho Asset Management)−1.43%−3.64%MFS Investment Management K.K.

11.21%

10.06%+1.15%

Nikko Asset Management Co., Ltd.

7.13%

10.06%−2.93%

Nomura Asset Management Co., Ltd.

−0.81%−3.64%+2.82%BNY Mellon Asset Management Japan Limited

15.53%

10.06%+5.47%

Mitsubishi UFJ Trust and Banking Corporation

6.69%

10.06%−3.36%UBS Asset Management (Japan) Ltd

15.57%

10.06%+5.51%

Lazard Japan Asset Management K.K.

−4.16%−3.64%−0.52%

Remarkscolumn○○○○② Investment performance (alternative assets)
Alternative
assetsInfrastructure

Private equity

Investment style
Global infrastructure
mandate focusing
mainly on
opportunities inJapan (Note 8)
Global-Core
Global-Core
Global-Core
Emerging markets-Diversified

Asset manager nameIRR
(local currency)
2.78%

IRR
(JPY)

Local
currency

Start ofinvestment

2.78%

JPY

March 2018

DBJ Asset Management Co., Ltd.

Nomura Asset Management Co., Ltd.
Sumitomo Mitsui Asset Management Company, Limited
In-house investment
In-house investment

Global-Core

Asset Management One Co., Ltd.

Japan-Core

Mitsubishi UFJ Trust and Banking Corporation

—

—

USD

April 2018−2.55%
1.45%
2.11%
3.43%

−1.63%
1.63%
0.99%
3.03%

USD
USD
USD
USD

—

—

USD

2.30%

2.30%

JPY

February 2018
January 2018
February 2014
June 2015
September
2018
December
2017

Real estate(Note 1) Funds are listed in the order of the Japanese syllabary.
(Note 2) Asset managers entrusted with investment for more than one contract using the same investment method are indicated in Roman numerals.
(Note 3) The time-weighted returns and the benchmark returns are annualized rates that exclude the effect of the trade suspended period for asset transfer.
(Note 4) Excess returns and information ratio may not equal the value calculated using the figures in the table because the figures are rounded off to two decimal places.
(Note 5) Time-weighted returns do not include returns from securities lending investment.
(Note 6) Internal rate of return (IRR) is a rate of return calculated by taking into account the effects of the size and timing of cash flows of investment target funds during
the investment period. The calculation period of IRR is from the start of investment to the end of the current fiscal year.
(Note 7) Actual investments in alternative assets are denominated in major investment currencies. IRR (yen-denominated funds) is calculated by converting cash flows
denominated in major investment currencies into yen at the going market exchange rate and is subject to exchange rate fluctuations throughout the investment period.
(Note 8) Domestic assets (currency: JPY) are managed separately from foreign assets (currency: USD).
(Note 9) A circle in the remarks column indicates an external asset manager with less than one year of investment period. The rates of returns of external asset managers
with less than one year of investment period show periodic rates of returns. The rate of returns for investments in alternative assets shows the rate of returns ofinvestment products with an investment period of one year or more. (A hyphen in the column indicates an asset with less than one year since the implementationof investment.)69

Code of Conduct【1】Social responsibility◆ GPIF’s mission is to contribute to the stability of the public pension system (Employees’ Pension
Insurance and National Pensions) by managing the reserve assets and distributing the proceeds to
the government.

【2】Fiduciary duty
◆ We fully understand that the reserve assets are instrumental for future pension benefits payments,
act solely for the benefit of pension recipients, and pledge to pay due attention as prudent experts
in exercising our fiduciary responsibilities. The Chairperson and the member of the Board ofGovernors shall by no means be motivated by benefitting the organizations to which they belong.

 ompliance with laws and maintaining highest professional ethics and integrity【3】C◆ We shall comply with laws and social norms, remain fully cognizant of our social responsibilities
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【8】Developing human resources and respect in the workplace◆ We are committed to GPIF’s mission by improving our professional skills and expertise, promoting
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◆ We shall respect each person’s personality, talents and capabilities, perspectives, well-being, andprivacy to maintain a good work environment, and never allow discrimination or harassment.

【9】Self-surveillance of illegal or inappropriate activity◆ Whenever an illegal or inappropriate activity is (or is expected to be) perpetrated by executives,
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◆ When such a report is made, we shall conduct the necessary investigation and take corrective
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8

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