Chapter 1

Investment Results in Fiscal 20191 Investment Results[1] R ate of investment return / Amount of investment returns, etc.
① Rate of investment return%

The rate of investment return for fiscal 2019 is-5.20 %.

(Unit: %)
1Q

3Q

4Q

Total

Quarterly
Cumulative

1.14

4.61

–10.71

–5.20

15.0

Domestic
bonds

0.81

0.31

–0.96

–0.51

–0.36

15.0
10.0

Domestic
equities

–2.31

3.34

8.58

–17.63–9.71

Foreign
bonds

0.94

1.21

0.86

0.50

3.55

Foreignequities

1.29

0.11

9.73

–21.88–13.08

5.91

Quarterly
Cumulative

0.16
0.16

1.29

5.91
4.61

1.14
1.29

4.61

-5.20
-5.20

1.14

-10.71

%

0.16

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

1Q

2Q

3Q

-10.71
4Q

1Q

2Q

3Q

4Q

%

10.0
5.0

3.55

5.0
0.0

3.55

Short-term
assets

–0.05

0.01

0.01

–0.01

–0.04

0.0
–5.0

FILP bonds

0.48

0.48

0.49

0.49

1.93

–5.0
–10.0
–10.0
–15.0

1.93

-0.36

-0.04

-0.36

-0.04
-9.71

1.93

-5.20
-5.20

-13.08-9.71 Foreign -13.08
Domestic Domestic
Foreign Short-term

FILP

Total

assetsbonds–15.0 bonds equities bonds equities(Note 1) Fiscal 2019 runs from April 1, 2019 to March 31, 2020.
Domestic Domestic Foreign Foreign Short-term FILP
Total
(Note 2) GPIF’s portfolio consists of the funds invested in the markets (hereinafter “market investment”,
whichismarkedtomarket)
and
FILP
bonds
bonds equities bonds equities
assetsbonds (see Note 5), which
are held to maturity and valued at amortized costs.
(Note 3) In this report, return figures are the average of returns of market investment and FILP bonds weighted with investment principal, and are gross of fees. The rateof 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 2019 is9,424.1

10,000-¥8,283.1 billion

0.

2,062.7256.9

7,361.3

1,805.8–10,000(Unit: ¥billion)
1Q
Total

2Q

3Q

4Q

Total

256.9

1,805.8

7,361.3 –17,707.2–8,283.1

Domestic
bonds

339.3

131.8

–408.7–184.5–122.1

Domestic
equities–892.6

1,261.6

3,348.0–7,418.5–3,701.5

Foreign
bonds

268.6

361.4

270.1

115.3

1,015.4

Foreignequities

541.3

46.1

4,147.0 –10,223.1–5,488.7

Short-term
assets

–3.9

0.6

0.7

–0.7

–3.4

FILP bonds

4.3

4.3

4.3

4.3

17.2

-8,283.1-17,707.2–20,000

1Q

2Q

3Q

4Q

¥billion

Market Investments

10,0005,000

1,015.40–5,000–10,000

17.2-3.4-122.1-3,701.5

Domestic Domestic
bonds
equities-5,488.7
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.

13-8,283.1
FILP
bonds

Total

③ Cumulative returns and asset size since fiscal 2001
Cumulative returns from fiscal 2001 to fiscal 2019 are
C
h
a
p
t
e
r

+¥57,537.7 billion

1
and the value of investment assets at the end of fiscal 2019 is¥150,633.2 billion.

Cumulative return¥billion

70,000+65,820.8+63,441.3

60,000+53,360.3
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 +11,689.3

10,000+4,463.8+1,851.1
0–587.4–10,000+57,537.7+50,733.8+11,389.4+2,504.3–3,040.5

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Asset size

¥billion

180,000
160,000

Market Investments

156,383.2159,215.4
150,633.2

FILP bonds

144,903.4
137,476.9134,747.5
126,577.1
119,886.8
122,842.5
117,628.6
116,317.0113,611.2120,465.3
114,527.8
102,871.4

140,000
120,000
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 FY2019(Note) The balance of FILP bonds increased from fiscal 2001 to fiscal 2007 due to underwriting, and decreased since fiscal 2008 due to redemption on
maturity.

14

Investment Results in Fiscal 20191 Investment Results④ Investment income
Returns on investment assets are valued at market prices and can be classified into investment income(interest and dividend income) and capital gains and losses (realized and unrealized gains or losses
due to price fluctuations). Investments of the pension reser ves are intended to deliver stable returns
in accordance with a policy asset mix established from a long-term perspective. Therefore, investment
income, which is generated stably from holdings of investment assets, is impor tant. In par ticular, while
market fluctuations may cause capital losses in the shor t term, investment income is relatively immune
to such volatility and generates a continuous stream of positive return.
T h e b r e a k d o w n o f i nve s t m e n t i n c o m e s h o w s t h a t i nv e s t m e n t i n c o m e f r o m d o m e s t i c a n d fo r e i g nequities has been increasing while that from domestic bonds has been decreasing in recent years.
Immediately after the star t of managing the pension reser ves, domestic bonds accounted for 60% to
70% of investment income, although those have recently declined to below 20%, while domestic andforeign equities account for about 60%. This is due to the fact in recent years that (i) the bond yields
have fallen significantly, falling well below the equity dividend yields; and (ii) GPIF has lowered theallocation of bonds and raised the allocation of equities in the policy asset mix since fiscal 2014.
In fiscal 2019, the total amount of investment income is	  ¥3,240.6 billion (rate of return: +2.15%),

and the cumulative amount of investment income for the 19 years since fiscal 2001, when GPIF star ted
managing pension reser ves, is¥37,141.2 billion (rate of return: +1.64%[annual rate]).

accounting more than 60% of the cumulative returns.

Cumulative returns and investment income since fiscal 2001
¥billion

70,00065,820.8

Cumulative returns
63,441.3

60,00057,537.7
53,360.3

50,733.8
50,00045,423.9
40,00037,141.2
35,441.5

33,900.6
30,859.7

30,00028,080.8
25,220.9

20,00017,370.3
13,425.8

10,00004,463.8
2,021.1
1,189.6
4,474.9537.8
3,127.0–587.4–10,000

15

6,115.5

23,005.0

20,751.8
16,636.7
18,610.7
14,602.6
11,852.5 12,509.4
13,998.6
10,315.7
11,389.4
11,689.3

25,547.4

Investment income(cumulative)

8,116.4
2,504.3

1,851.1–3,040.5

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Investment Results in Fiscal 20191 Investment Results

Investment income％¥billion

3,500

2.50
Foreign equities

3,250

2.15%

Foreign bonds
Domestic equities

1.91%

Domestic bonds

3,000

Investment income

1.78%

2,750

1.79%

2,500

1.80%

1.75%

1.79%

1.67%

1.64%

1.69%

1.64%

1.30%
1.18%

1,750

1.27%

210.6
162.2

1,000
107.2
69.6 135.7
77.8 99.2
64.4

750
45.4
54.4
44.7

500
390.5

192.8

318.3

338.5

398.3

401.4

266.3

234.3

353.1

399.5
266.0

244.1

323.5

331.1

303.2

438.1

753.4

360.4

320.0

324.8

719.8
383.8

420.4

490.4

517.8

1,225.7

1,255.9720.8

1,180.9

818.9

628.2

1.00
366.6

445.7

607.5

684.3

165.3
1,038.4

1.50

530.0

210.2

123.9

626.3
439.0

247.7

301.1
292.4

263.7

1,250

0

308.8

1.31%

1,500

250

771.4

1.43%

1.39%

1

976.1
869.9

2,250
2,000

2.00

1,038.2

1.89%

1.87%

C
h
a
p
t
e
r

782.4

907.0

982.0

0.50
1,076.1

827.5

968.3

952.4

855.1

488.5

672.3

577.9

498.4

438.9

402.0

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

0.00(Unit: ¥billion)

Cumulative

FY2001

FY2007

FY2008(1.03%)(1.03%)(1.10%)(1.12%)

827.5

1,038.4

1,225.7

Domestic
equities

7,122.0

44.7

64.4

99.2

123.9

165.3

210.2

244.1

266.3

Foreignbonds

7,229.6

Foreignequities

8,140.1

Total

37,141.2(3.18%)(2.23%)(1.64%)FY2010
Domestic
bonds

1,180.9(1.52%)

266.0

54.4

(4.04%)

45.4(1.19%)

537.8(1.39%)FY2011
1,076.1(1.50%)

303.2

77.8

(3.06%)

69.6(1.56%)

651.8(1.30%)FY2012968.3(1.30%)

324.8

135.7

(3.43%)

107.2(1.00%)

192.8(3.33%)

162.2

720.8

FY2006(1.26%)(0.83%)

626.3

FY2005(1.49%)(0.87%)

488.5

FY2004(1.27%)(0.65%)

439.0

FY2003

14,634.9(1.64%)

390.5

FY2002

Domestic
bonds(0.87%)

247.7(3.28%)

210.6(1.10%)

338.5(3.73%)

263.7(1.21%)(1.77%)

399.5(4.13%)

318.3(1.41%)(2.34%)

398.3(3.98%)

308.8(3.40%)(2.27%)

831.4

1,106.0

1,347.9

1,640.7

2,000.8

2,199.4

2,193.7(1.18%)FY2013952.4(1.36%)

366.6(1.27%)FY2014855.1(1.51%)

445.7(1.31%)FY2015672.3(1.27%)

607.5(1.43%)FY2016577.9(1.21%)

684.3(1.67%)FY2017498.4(1.12%)

782.4(1.87%)FY2018438.9(1.02%)

907.0(2.23%)(2.48%)(2.42%)(2.22%)(1.76%)(2.48%)(2.16%)(2.25%)(2.33%)

2,093.2

2,034.1

1,973.9

2,141.1

2,253.2

2,542.4

2,533.4

2,778.9

Total

292.4

(1.80%)

323.5(1.79%)

320.0(2.71%)

360.4(1.64%)

301.1(2.92%)

Foreignequities

331.1

401.4

(3.96%)(2.09%)(3.75%)(3.33%)

234.3(1.59%)(1.96%)

Foreign
bonds

353.1

(1.51%)(1.99%)(1.98%)(1.85%)

1,255.9(1.81%)

Domestic
equities(2.14%)

FY2009(1.76%)

383.8(2.74%)

438.1(1.69%)(1.41%)

420.4(2.31%)

530.0(1.64%)(1.99%)

490.4(2.59%)

771.4(1.89%)(1.95%)

517.8(2.63%)

753.4(1.75%)(1.92%)

628.2(2.63%)

869.9(1.78%)(2.35%)

719.8(1.79%)FY2019402.0(1.08%)

982.0(2.76%)

818.9(2.59%)(2.25%)

976.1

1,038.2

3,040.9

3,240.6(1.91%)(2.79%)(2.15%)(Note 1) Due to rounding off, the sum of the figures for each individual fiscal year does not necessarily match the cumulative amount of investment income.
(Note 2) The 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) The annual rate of return (cumulative) represents the geometric mean of the rates of return for individual fiscal years (annualized).

16

Investment Results in Fiscal 20191 Investment Results⑤ Comparison to long-term investment targets

The average real investment return is

and

2.49%

2.39%

for the 19 years since fiscal 2001

for the 14 years since fiscal 2006, GPIF was established as an incorporated administrative agency.

Long-term investment targets after fiscal 2015
are

+1.7%

above the nominal wage growth rate.

Our average real investment return is higher than the long-term investment targets.
For the roles of reser ve fund in pension finance, refer to page 71-72.
(Note) The real investment return is net investment yield on the pension reserve
fund less the nominal wage growth rate, since public pension benefits
are indexed to wages until retirement. GPIF’s long-term investment
objectives are +1.1% from fiscal 2006 to fiscal 2009, +1.6% from fiscal
2010 to fiscal 2014, and +1.7% after fiscal 2015, above the nominal wage

growth rate, respectively. Note that these are required as long-term
investment targets, and are not necessarily required to be fulfilled on
an annual or during a specified time period (such as five years for the
Medium-term Plan).

Real return on Investment (cumulative) since fiscal 2001

(%)
10.0

GPIF investment results

8.0(cumulative yield from fiscal 2001 to theend of each fiscal year (annual rate))

6.0

2.39% (FY2019)

4.0
2.0
0.0

Long-term investment targets

-2.0
-4.0
-6.0

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019(Note 1) Real investment return (%) is calculated as (1 + nominal investment return [%]) / (1 + nominal wage growth rate [%]) - 1.
(Note 2) Long-term investment targets are +1.1% from fiscal 2006 to fiscal 2009, +1.6% from fiscal 2010 to fiscal 2014, and +1.7% after fiscal 2015, above the nominal wage growth rate, respectively.
(Note 3) Figures are calculated on a geometric mean basis using cumulative yield from fiscal 2001 to the end of each fiscal year (annualized).

GPIF’s investment performance(Unit:%)

Performance

FY2001 FY2002 FY2003 FY2004 FY2005

17

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

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

Nominal wage growth rate

–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

7.61

7.90

2.91

3.11

9.57

9.76

3.52 –4.69 –7.61

7.88 –0.27

2.29 10.21

0.68 –0.21
2.51

8.62 12.24 –3.84

5.82

6.86

1.49 –5.22

0.21

0.13

0.50

0.03

0.41

0.95

9.98

8.48 11.14 –4.31

5.79

6.43

0.54 –5.88

0.99

Last14years Last19years(annualized) (annualized)

2.48

2.27

0.70 –0.01 –0.11
2.49

2.39

Investment Results in Fiscal 20191 Investment Results⑥ Investment assets and portfolio allocation(Pension reserves managed by GPIF and the Pension Special Account)
Inside:policy asset mix (figures in parentheses
indicate deviation limits)

Outside: at the end of March 2020

Foreign equities

23.90%¥37,163.9 billion

Domestic bonds (Note6)

25 %

35 %

( ± 8%)

15%±

Foreign bonds(Note6)(- Foreign bonds(No hedge)

4%)22.22%¥34,549.8 billion

23.87%¥37,125.9 billion

C
h
a
p
t
e
r

1

( ± 10 % )Short-term assets (Note5)

5.95%¥9,255.2 billion

25 %( ± 9%)- Foreign bonds(JPY hedged)

1.20%¥1,858.9 billion

Domestic equities

22.87%¥35,563.0 billion
Market value (¥billion)

Allocation of pension reserve

Domestic bonds

37,125.9

23.87%

Market investments

36,229.7

23.30%(Book value)

896.2

0.58%

(Market value)(937.1)

—

FILP
bonds

35,563.0

22.87%No hedge

34,549.8

22.22%

JPY hedged

1,858.9

1.20%

Foreign equities

37,163.9

23.90%

Short–term assets

9,255.2

5.95%

Total

155,516.8

100.00%

Domestic equities
Foreign bonds(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 2019 (about ¥4.9 trillion), this amount is prior
to the adjustment for revenues and expenditures and differs from the amount in the final settlement of accounts.
(Note 5) At the end of March 2020, 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) JPY hedged foreign bonds are considered as alternatives to Domestic bonds in current market trends, and they are similar in terms of risk and return
characteristics. Accordingly, JPY hedged foreign bonds are excluded from Foreign bonds and included in Domestic bonds in terms of allocation at the end of
March 2020. In other cases, such as the rate of investment return for each asset class, JPY hedged foreign bonds are classified as Foreign bonds.
(Note 7) Although the allocation of Foreign bonds exceeded the deviation limit at the end of March 2020, during the period when the policy asset mix was in transition,
GPIF has managed it properly according to the decision of the Board of Governors.
(Note 8) The percentage of the alternative investments: 0.61% (within maximum 5% of total portfolio)⑦ Allocation changes for each asset class due to rebalancing(Unit:¥billion)

Allocated/withdrawn

Domestic bonds

Domestic equities

Foreign bonds

Foreign equities–5,931.9+609.5+7,579.7+757.0(Note) Each figure shows the net rebalancing amount.

18

Investment Results in Fiscal 20191 Investment Results⑧ Factor analysis of difference from compound benchmark return
The total rate of return on all investment assets for fiscal 2019 was below the compound benchmark
return (a rate obtained by weight-averaging the benchmark rates of return on individual assets
according to the shares in the polic y) by 0.25%. This is contributed mainly by domestic bonds being
under weight from the polic y asset mix weights, whose benchmark rates of return (-0.43%) exceeded
the compound benchmark rates of return (-4.94%). During the period, the rate of return of foreign
bonds was the highest among asset classes, which contributed significantly to the entire por tfolio.
In fiscal 2019, the total rate of returnon all investment assets came torepresenting an excess rate of
return amounting toagainst a compoundbenchmark return of–5.20%–4.94%–0.25%,.

The average of the annual rate of
return for the 14 years since the GPIF’s
establishment in fiscal 2006 on allinvestment assets waswhile the compound benchmark
rate of return was

The excess rate of return was

2.49%

2.53%

–0.05%,.

.

GPIF breaks down the difference between the total rate of return on all investments and the compound benchmark rate of return
into the following three factors to ascertain which factors contribute to the deviation.
(i) Asset allocation factor: 	Deviations resulting from differences between the actual asset mix and the policy asset mix
used 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 2019, the return deviation attributable to asset
allocation was -0.20%. Domestic bonds, which delivereda notably higher return than the compound benchmark
return in the fourth quarter, were underweight on averageto the policy asset mix. The return deviation attributable toindividual asset factors was -0.05% as a whole although there
are positive and negative deviations depending on the asset
class.

Factor analysis of the difference from the compound benchmark return in fiscal 2019
Rate of return
Return of GPIF Benchmark return
Total
Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
Short-term assets

–5.20
–0.31
–9.71
+3.55
–13.08
–0.04

–4.94
–0.43
–9.50
+4.37
–13.40–0.04

Excess rate of
return
–0.25
+0.13
–0.20
–0.82
+0.32
0.00

(Unit:%)

Factor analysis of excess rate of return
Asset allocation Individual asset
Other factors
factor(1)factor(2)(including error)(3)
–0.20
–0.05
–0.00
–0.69
+0.04
–0.01
–0.03
–0.05
+0.00
+0.69
–0.12
–0.08
–0.23
+0.08
+0.01
+0.07
0.00
0.00

(1)+(2)+(3)
–0.25
–0.66
–0.08
+0.49
–0.14
+0.07

(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 2019)

Rate of return
2.49
4.56
–6.10
–7.57
7.91
–0.25
2.32
10.23
8.64
3.97

2.53
4.64
–6.23
–8.45
8.54
–0.02
2.59
9.00
7.74
3.50

Excess rate of
return
–0.05
–0.08
+0.13
+0.88
–0.63
–0.23
–0.27
+1.24
+0.90
+0.46

Asset allocation
factor(1)
–0.04
–0.06
+0.17
+0.90
–0.70
–0.26
–0.19
+1.40
+0.92
+0.47

8.19
–3.81
5.86
6.90
1.52
–5.20

9.98
–3.81
6.22
7.26
1.92
–4.94

–1.78
+0.00
–0.37
–0.37
–0.40
–0.25

–1.99
+0.21
–0.66
–0.36
–0.38
–0.20

Return of GPIF Benchmark return
FY2006-FY2019
FY2006
FY2007
FY2008FY2009FY2010FY2011FY2012FY2013
FY2014from Apr.1 to Oct.30
FY2014from Oct.31 to Mar.31, 2015
FY2015FY2016FY2017FY2018FY201919(Unit:%)

Factor analysis of excess rate of return
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
–0.03
+0.02
+0.01
–0.15
+0.33
+0.00
+0.02
–0.05

+0.19
–0.06
–0.04
–0.01
–0.04
–0.00

(1)+(2)+(3)
–0.05
–0.08
+0.13
+0.88
–0.63
–0.23
–0.27
+1.24
+0.90
+0.46
–1.78
+0.00
–0.37
–0.37
–0.40
–0.25

(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 (anannualize rate).
(Note 2) From fiscal 2006 to fiscal 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.

Investment Results in Fiscal 20191 Investment Results⑨ Fees and expense¥31.9 billion
0.02%

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.

In fiscal 2019, total fees were
The average fee rate on the total
investment assets for fiscal 2019 was

1.

Total fees increased by ¥2.5 billion from the previous fiscal year due to an increase in total assets under management. The
increase was also partially attributable to active asset managers who achieved the target excess return rate mainly in foreign
equities.
Management and custodian fees

¥billion%

60.0Management and custodian fees

Management and custodian fees

50.0

38.3

40.0

30.9

30.0

0.03

20.0

0.09

48.7

Average fee rate against investment assets

0.08

40.0

0.07

34.3
28.8
0.03

0.02

25.8
0.02

29.1
24.6
0.02

23.1
0.02

22.2
0.02

29.5

25.3
0.03
0.02

0.03

31.9

0.05

0.03

0.02

0.06

0.04

0.02

0.02

0.03
0.02

10.0

0.01
0.0

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019

107.7

120.2

119.6

123.9

118.1

112.0

111.5

123.9

131.9

139.0

137.3

155.7

158.9

161.4

平均残高

（兆円）
Management
and custodian fees by asset class

Total
Domestic bonds
Domestic equities
Foreign bonds
Foreign equities
Alternative assets

Average fee rate against investment assets

0.10

0.00

(Unit: ¥billion)

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019

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

31.9
2.0
6.5
7.1
15.5
0.7

(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

FY2014FY2015FY2016FY2017FY2018FY2019

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

0.02
0.01
0.02
0.02
0.04
0.14
161.4

(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 book values calculated by theamortized cost method are used.

20

Investment Results in Fiscal 20192 Basic Policy of Portfolio Risk Management

2 Basic Policy of Portfolio Risk Management[1] Basic policy
The purpose of investing the pension reser ves is tocontribute to the future stability of the management of the
public pension scheme through stable and efficientmanagement from a long-term perspective solely for the
beneficiaries. The Medium–term Objectives approved by the
Minister of Health, Labour and Welfare (MHLW) stipulate thatGPIF is required to achieve a long–term real return (net
investment yield on the pension reserve fund less thenominal wage growth rate) of 1.7% with minimal risks.
Amid heightened uncertainties about the recent market andeconomic environment, the risk GPIF focuses on refers not to“a risk caused by short-term fluctuations in market prices”
but to “a risk of failing to achieve a long-term investment
return required for the pension finance.”
It is commonly known that, in a long-term investment,
maintaining portfolio (a policy asset mix) over the long termyields a better result effectively, rather than changing theportfolio in response to short-term market fluctuations. In
fiscal 2019, GPIF verified the policy asset mix from a longterm perspective based on the result of the once-every-fiveyears financial verification. Since long-term investment
results shall be mostly attributable to a policy asset mix, we
believe that the policy asset mix is the core of portfolio risk
management.
GPIF manages the policy asset mix in an appropriatemanner, invests in diversified assets, and carries out risk

management at the level of assets as a whole, individual
asset classes, and individual asset managers, respectively. At
the same time, it ensures the achievements of thebenchmark rates of return of both assets as a whole andindividual asset classes by monitoring various indices frommultilateral perspectives. In cases when it is considerednecessary to take a certain measure, GPIF carries out anappropriate measure in line with a predetermined rule.
(Note) For details of the review of the policy asset mix, refer to page 43-48.

The basic policy of the above-mentioned portfolio risk
management is expressly described in the “Basic Policy” of
the “Portfolio Risk Management Policy” established by the
Board of Governors. In accordance with this Basic Policy,
GPIF manages market risks, liquidity risks, credit risks, andcountry risks in an appropriate manner. We also perform risk
monitoring based on domestic and overseas
macroeconomic trends and geopolitical risks, as well as
various risk management indicators including tracking
errors, Value at Risk (VaR) and stress tests. GPIF does so in atimely manner, so that risks can be discussed at theInvestment Committee and the Portfolio Risk Management
Committee and periodically repor ts to the Board ofGovernors. As such, we implement appropriate measures
taking into account long-term risk-return profiles.

<”Basic Policy” of GPIF’s portfolio risk management>(1) GPIF formulates a policy asset mix and appropriately manages it to ensure the achievement of the investment return
required for the pension finance 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 classes, and external asset managers, etc.,
while ensuring the achievement of the benchmark rate of returns for the entire portfolio as well as for each asset class.
(4) GPIF carries out flexible investment based on a proper outlook for the market environments, within a deviation limit forthe policy asset mix, upon thorough analysis on the current trends marked by the fast-changing economic and market
environments; provided, however, that the outlook must indicate reasonable grounds.
(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 as well as securing assets without shortages.
(6) Regarding investment and management of the pension reserves, GPIF constantly strives to enhance its expertise, clarify
the system of accountability, and implement thorough compliance with the duty of care and fiduciary duty of aprudent expert.
[Types of risk]
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

The risk of facing a difficulty in securing the 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
Liquidity risk increase in cash outflow (cash management risk) and the risk of incurring losses resulting from the inability to
conduct market transactions due to confusion in the market or being forced to conduct market transactionsat prices significantly more disadvantageous than normal (market liquidity risk)

21

Credit risk

The risk of incurring losses due to reduction or elimination of the value of assets, including derivatives, due tofactors such as deterioration in the financial position of issuers of the portfolio assets, institutions entrustedwith 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 20192 Basic Policy of Portfolio Risk Management[2] Risk management based on a policy asset mix
As m e n t i o n e d a b ove, G P I F b e l i e ve s t h a t t h e m o s tnecessarily trigger rebalancing, we consider them as one

important aspect of portfolio risk managements is a properof the indicators to facilitate the management of andmanagement of asset allocation based on a policy asset

adherence to the deviation limits, and expressly states amix. Since the markets constantly change, it is essential

responsive process in the event of the exceeding of these

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to establish a framework that enables GPIF to manage

two limits. Although foreign bonds allocation exceeded1

investments flexibly within a reasonable range, while actual

the alarm point in fiscal 2019, we properly managed theinvestments shall be carried out based on the policy asset

investments in compliance with a predetermined process.

mix. Accordingly, GPIF flexibly manages portfolio within the

While the upper limit for alternative assets is set as 5% of thedeviation limits, while establishing alarm points within these

total assets, we have also established alarm points for thelimits in order to assure the management of and adherence

assets and expressly states a responsive process in the eventto them. Although alarm points are not equivalent toof the exceeding of these two limits.

deviation limits, and exceeding an alarm point may not
Domestic bonds
Management of deviation limits for each asset class Foreign bonds

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

Upper deviation limit
Policy asset mix

35.00%

Policy asset mix

35.00%
31.02%

Actual allocation
Actual allocation

Lower deviation limit

Mar

Apr
Apr

May
May

Jun
Jun

Policy asset mix

10.0

Aug

Sep
Sep

Oct
Oct

Nov
Nov

Dec
Dec

Jan
Jan

Feb
Feb

Mar
Mar

25.00%

Policy asset mix

Actual allocation

25.00%
22.87%

Actual allocation

22.87%

Lower deviation limit
Lower deviation limit
Mar
Apr
May
Jun

Mar

Apr

May

Jun

Jul
Jul

Aug
Aug

Sep
Sep

Oct
Oct

Nov
Nov

20.0

Upper deviation limit

20.0

Upper deviation limit

15.0
15.0

10.0

Lower deviation limit

5.0

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

Dec
Dec

Jan
Jan

Feb
Feb

Mar
Mar

Foreign equities
Upper deviation limit

35.0
30.0

Upper deviation limit

30.0
25.0
Policy asset mix

20.0
15.0
15.0
10.0
10.0

15.00%

Mar

%
40.0
35.0

25.0
20.0

15.00%

Actual allocation

Policy asset mix
Lower deviation limit

5.0

Actual allocation

Policy asset mix

10.0

22.22%
22.22%%
40.0

Domestic equities

30.0
25.0

15.0
10.0

Jul

Aug

Upper deviation limit

35.0
30.0

20.0
15.0

Jul

Domestic equities

Upper deviation limit

25.0
20.0

31.02%

Lower deviation limit

Mar

Foreign bonds%
25.0

Upper deviation limit

%
40.0
%
40.0
35.0

%
25.0

Domestic bonds

Actual allocation

25.00%

Actual allocation

25.00%
23.90%

Policy asset mix

23.90%

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

(Note 1) Asset allocation is calculated including reserves managed in the Pension Special Account.
(Note 2) The deviation limits under the third Medium-term Plan are ±10% for domestic bonds, ±9% for domestic equities, ±4% for foreign bonds, and ±8% for foreign
equities. Based on the current market trends such as a significant fall in the domestic bond yields, 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. Moreover, based on thefact that JPY hedged foreign bonds have become a potential alternative asset class to domestic bonds under the current market trends, JPY hedged foreign
bonds have been subtracted from the allocation of foreign bonds, and added to domestic bonds within the range allocated for domestic bonds since October
2019.
(Note 3) 	Although the allocation of Foreign bonds exceeded the deviation limit at the end of March 2020, during the period when the policy asset mix was in transition, GPIF has managed it properly according to the decision of the Board of Governors.

22

Investment Results in Fiscal 20192 Basic Policy of Portfolio Risk Management【Monitoring of short-term risk indicators】
In fiscal 2019, from a multitiered risk management

but turned downward in the fourth quarter, a movement

perspective, a VaR ratio was added to monitoring indicators

contradictory to VaR.

as a trial in addition to the aforementioned management on

As mentioned above, GPIF is expected to ensure thea deviation limit basis. A VaR ratio is obtained by dividing

achievement of the investment yield required for the pension

VaR (See Note) for the actual asset mix by VaR for the policy

finance and contribute to the stable operation of pension

asset mix, an indicator for monitoring as to what extent thefunds, and accordingly, we need to manage “a risk of failing torisk amount of the actual portfolio deviates from that of theachieve a long-term investment return required for thepolicy asset mix.

pension finance.” and keep it at the lowest possible level. To

For instance, in either of the cases of two observing years

that end, we must monitor individual indicators from aand five observing years, VaR which is one of the commonly

multitiered perspective while giving careful considerations toused risk indicators, remained almost flat until the third

their characteristics, in an aim to minimize the “risk of failing toquarter, and then moved upward in the fourth quarter inachieve a long-term investment return required for the

response to a rise in market volatility (a widening of thepension finance.” by utilizing a short-term risk indicator such

fluc tuation range) due to the COVID -19 pandemic.

as VaR solely as one of the referential indicators.

Conversely, the VaR ratio moved upward in the third quarter(Note) VaR indicates the largest loss likely to be suffered for individual assets assuming a certain holding period with a given probability (confidence level).

【VaR ratio and VaR】
VaR ratio

% VaR
17.0
policy asset mix:VaR

actual asset mix:VaR

VaR ratio

1.15

VaR ratio

15.0

1.10

13.0

1.05

11.0

1.00

9.0

0.95

7.0

0.90

5.0

0.85

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

2019
(Note) VaR is calculated using the delta method based on the 1σ confidence level over a one-year holding period and two-year observation period.

VaR (Two-year observation period)%
30

the delta method:1σ

the delta method:95%

the delta method:1σ

25

25

20

20

15

15

10

10

5

5

0

Apr

May

Jun

Jul

VaR (Five-year observation period)

%
30

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

0

Apr

May

Jun

Jul

the delta method:95%

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

(Note) VaR is calculated using the delta method based on the 1σ and 95% confidence level over a one-year holding period and two-year and five-year observation
period (ratios are calculated on an actual asset mix basis for both periods).

23

Investment Results in Fiscal 20192 Basic Policy of Portfolio Risk Management[3] Diversification effect and risk management of alternative assets
Alternative assets (including infrastructure, private equity

alternative assets covers assessment items specificallyand real estate) have different risk-return profiles fromrequired for in alternative investments, as well as thosetraditional assets such as listed equities and bonds, and arecommon to traditional assets.

less likely to be affected by price volatility in the public

Collaboration between the Portfolio Risk Management

market, etc. Considering these profiles, the inclusion of

Department that is responsible for the risk management foralternative assets in GPIF’s portfolio is expected to generate

the entire GPIF and the Private M arket I nvestment

diversification effects and improve the investment efficiency.

Department was facilitated, enabling more elaborate risk

Accordingly, GPIF has increased investments in alternative

management. GPIF will continue the efforts to ensure

assets since fiscal 2017. To fulfill the need for target asset-

comprehensive, elaborate risk management.

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1

specific expertise, risk management of investment in(Note) For details of investment in alternative assets, refer to page 30-42.

[4] Risk management from a long-term perspective① Stress tests
Among the various risk indicators mentioned above, stress

how much the risks will affect our portfolios in the shorttests are used as one of the approaches for measuring theterms but also the analysis of what impact will be generated

impact on returns and capital in the event of a significant

in the medium to long term. In fiscal 2019, GPIF carried out

market movement, and determining a method to implement

stress tests with a new policy asset mix (see Note) ensuring

a proper measure accordingly. In general, stress tests are

objectivity by using two past scenarios: the global financial

considered as a way to assess a short-term impact sufferedcrisis of 2008-2009 when a massive fall in stock prices wasdue to market fluctuations.

seen, and the dot-com bubble burst of 2001 followed by

However, considering that a long-term perspective is crucial

slow market recovery. The result shows that, in bothto carry out investment management of the pension

scenarios, although ac tual accumulated returns on

reserves stably and efficiently, medium-to long-term risk

investments since 2001 (when GPIF started management ofmanagement takes a higher priority for GPIF. GPIF’s stressthe pension reserves) are temporarily affected, they resume

tests are carried out, therefore, in reference to overseas

an expected level in a few years following the recovery of thepension funds, by focusing on not only the assessment ofmarkets.

(Note) For details of the new policy asset mix, refer to page 43-48.
%
120
100

Actual rate of return
Expected real return under the New policy asset mix
Stress Scenario (the Global financial crisis)
Stress Scenario (the Dot-com bubble burst)

80
60
40

GPIF Investment Results(annualized 2.87%)

20
0

FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

(Note 1) GPIF’s investment results (annualized return of 2.87%) are based on the figures as of fiscal 2018.
(Note 2) The figure for fiscal 2019 represents the result as of Dec. 31, 2019.

24

Investment Results in Fiscal 20192 Basic Policy of Portfolio Risk Management② ESG as a long-term risk management measureConsidering that a long-term perspective is legally required

reducing negative impacts on the portfolio in the long run. In

to carry out investment management of the pension reserve

fiscal 2019, GPIF newly adopted a portfolio risk management

fund safely and efficiently, long-term risk management takes

tool, by selecting the one that meets the requirement

a higher priority for GPIF.

for value-added features, which will enable a long-term

GPIF promotes investment with consideration tomultiperiod scenario analysis and the measurement of long-

Environmental, Social and Governance (ESG) factors, because

term risks such as climate change risks. With this tool, GPIF

it can be considered as the very method used for portfolio

will further enhance long-term risk management.

risk management from a long-term perspective in terms of③ Securing the amount of planned reserves
Another important issue is how to control risks that theconfirm the risks of an inability to attain the amount ofamount of pension reserves falls below the amount ofplanned reserves on the financial verification. Thus, weplanned reserves in the long run. The new policy asset mix

managed to select the most efficient portfolio that seeks

was formulated in fiscal 2019 through a process of simulation

to minimize a downside risks, while meeting investment

with a stochastic calculation using random numbers to

objectives.

(Note) For details of the new policy asset mix, refer to page 43-48.

Comparison with planned reserves
Pension reserves(¥trillion)

1,500
New policy asset mix

1,200

All-domestic-bond portfolio
Reserve asset that the financial
verification assumes
Previous policy asset mix

Probability (risk) of falling
below planned reserves
75thpercentile

In 25 years

900(As of the end of FY2043) (As of the end of FY2068)
Median600

300

25thpercentile
25thpercentile

0
2020(Unit: %)In 50 years

2025

2030

2035

2040

Median2045

75thpercentile

2050

2055

New policy asset mix

38.1

39.8

All-domestic-bondportfolio

100.0

100.0

Previous policy
asset mix

2060

(Unit: %)(Reference)

40.0

43.0

2065 (FY End)

(Column) The COVID-19 Pandemic
Regarding the COVID-19 pandemic, which started in the fourth quarter of fiscal 2019, GPIF carefully tries to project
how GPIF’s pension management will be affected as the viral infection spreads and by its prolonged impact.
As mentioned above, during the fourth quarter when the impact of COVID-19 came to the surface, investors’ risk
aversion increased rapidly, and stocks in Japan and overseas markets fell significantly while the yen appreciatedagainst the euro and the U.S. dollar. After that, the markets regained their balance but remained highly volatile with arapid recovery in domestic and foreign stock prices.
It is quite difficult to assess how the COVID-19 pandemic will affect the markets in the medium and long run at the
moment. While keeping a careful eye on market trends, GPIF strives to implement appropriate risk management by
periodically updating the Board of Governors with issues discussed at the Investment Committee and the Portfolio Risk
Management Committee, and determine necessary measures that GPIF should take as a long-term investor.

25

Investment Results in Fiscal 2019

3 Status of Investment in Each Asset Class

3 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),

positive mainly because the market value composition of thethe excess rate of return over the benchmark was +0.13%

g o ve r n m e n t b o n d s e c t o r w a s u n d e r we i g h t t o t h e(+0.31% for active investment and +0.07% for passive

be nchm a r k . I n pa ssi ve i nve st m e nt , t h e ret ur n wasinvestment). In active investment, the excess return wascomparable with the benchmark.

1② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (+0.13%) on domestic bond investment (market investment) by factor is as follows: fundfactors*1: +0.13%; 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

–0.36

–0.49

+0.13

+0.13

–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: %)NOMURA-BPI
NOMURA-BPI
NOMURA-BPI/(excluding ABS) government bonds GPIF Customized(passive)(passive)(passive)

InflationNOMURA-BPI plus
Inflation-Linked bonds Linked bonds(active)(active)

Alternative(active)

Total

Fund factors

+0.00

+0.00

+0.04

+0.04

+0.03

+0.02

+0.13

Benchmark factors

+0.04

+0.11

–0.01

+0.05

–0.19

+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 consistingof 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 arecalculated taking into consideration the market total average balance of each fund.
*3 Other factors refer to calculation errors and such.

26

Investment Results in Fiscal 2019

3 Status of Investment in Each Asset Class[2] Foreign bonds① Excess rate of return
The excess rate of return over the benchmark was -0.82%

corporate bonds fell below that of U.S. government bonds. In(-6.87% for active investment and +1.45% for passive

passive investment, the excess return was positive because,

investment). In active investment, the excess return wasamong other reasons, the market value composition of USD

negative mainly because the market value composition ofbonds was overweight to the benchmark, and that of EUR

corporate bonds in the USD bond sector was overweight tobonds was underweight to the benchmark.

the benchmark when the excess return rate of USD② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (-0.82%) on foreign bond investment by factor is as follows: fund factors*1: -0.77%;
benchmark factors*2: +0.05%; other factors*3: –0.10%.
(Unit: %)Time-weighted rateof return (1)Benchmark(2)

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

Benchmark factors

Other factors

3.55

4.37

–0.82

–0.77

+0.05

–0.10

The negative excess rate of return reflected the underperformance of the returns of the individual funds of active investment(global aggregate) to the manager benchmarks (a fund factor).
[Factor analysis by manager benchmarks, etc.]
WGBI(passive)(Unit: %)

U.S.
U.S.
EuropeU.S.
EuropeWGBI others
government government
government
government
government(passive)
JPY hedged 1-3years
JPY hedged(passive)(passive)(passive)(passive)(passive)

Fund factors

+0.12

–0.00

+0.04

+0.00

+0.00

+0.01

+0.01

Benchmark factors

0.00

–0.02

+0.99

+0.15

–0.04

–0.29

+0.10
(Unit: %)Globalaggregate(active)

U.S.
aggregate(active)

Europeaggregate(active)U.S.
high–yield(active)

Europehigh–yield(active)

Emerging
U.S. dollar(active)

Emerging
local
currency(active)

Alternative(active)

Total

Fund factors

–0.79

–0.12

–0.00

+0.01

+0.01

–0.01

–0.05

–0.00

–0.77

Benchmark factors

–0.50

+0.06

–0.11

–0.10

–0.10

–0.03

–0.07

0.00

+0.05

*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 (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.

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Investment Results in Fiscal 2019

3 Status of Investment in Each Asset Class[3] Domestic equities① Excess rate of return
The excess rate of return over the benchmark was -0.20%

sector, the electronic machinery sector, as well as the(-2.08% for active investment and -0.01% for passive

information and telecommunication sector and the service

investment). In active investment, the return

sector, and other factors. In passive investment, the return

underperformed the benchmark because of the negativewas comparable with the benchmark.

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contributions of security selection in the medical products② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (-0.20%) on overall domestic equity investment by factor is as follows: fund factors*1:-0.03%; benchmark factors*2: -0.15%; other factors*3: –0.02%.
(Unit: %)Time–weighted rateof return (1)Benchmark(2)

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

Benchmark factors

Other factors

–9.71

–9.50

–0.20

–0.03

–0.15

–0.02

The negative excess rate of return reflected the underperformance of the manager benchmarks for S&P GIVI Japan, NOMURARAFI, and RUSSELL/NOMURA Large Cap Value investments to the benchmark for domestic equities (a benchmark factor).

[Factor analysis by manager benchmarks, etc.](Unit: %)RUSSELL/ MSCI Japan MSCI JapanFTSE Blossom
NOMURA ESG Select Empowering
Japan
Prime
Leaders
Women(passive)(passive)(passive)(passive)

S&P/JPX
CarbonEfficient(passive)

S&P GIVI
Japan(passive)

NOMURA
RAFI(passive)

+0.00

+0.00

–0.02

–0.01

–0.01

–0.01

–0.01

+0.00

+0.02

+0.01

+0.16

+0.08

+0.04

+0.00

–0.15

–0.14

TOPIX
(passive)

JPX Nikkei
400(passive)

Fund factors+0.02

Benchmark factors

0.00(Unit: %)TOPIX(active)

RUSSELL/ RUSSELL/ RUSSELL/MSCI Japan Alternative
NOMURA NOMURA NOMURA
Small
Large Cap Value Small Cap Small Cap Growth(active)(active)(active)(active)(active)

Total

Fund factors

–0.03

+0.03

–0.00

–0.02

–0.00

+0.01

–0.03

Benchmark factors

0.00

–0.14

–0.01

–0.01

–0.02

0.00

–0.15

*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 [incl. dividends]). They arecalculated taking into consideration the market total average balance of each fund.
*3 Other factors refer to calculation errors and such.

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Investment Results in Fiscal 2019

3 Status of Investment in Each Asset Class[4] Foreign equities① Excess rate of return
The excess rate of return over the benchmark was +0.32%

markets. In the emerging-country markets, security selection(+3.17% for active investment and +0.02% for passivein the materials sector, as well as the medical products,

investment). In active investment, the return outperformed thebiotechnology, and life science sector contributed positively,

benchmark in part because of the positive contributions ofamong other factors. In passive investment, the return was insecurity selection in the automobile and automobile parts sectorline with the benchmark.

and the consumer services sector, in the developed-country② Contribution analysis of excess rate of return
The breakdown of the excess rate of return (+0.32%) on foreign equity investment by factor is as follows: fund factors*1:+0.30%;
benchmark factors*2: +0.05%; other factors*3: –0.02%.
(Unit: %)Time-weighted rateof return (1)Benchmark(2)

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

Benchmark factors

Other factors–13.08–13.40

+0.32

+0.30

+0.05

–0.02

Some active investment in developed-country markets and ACWI outperformed their manager benchmarks, and made positive
contributions.
[Factor analysis by manager benchmarks, etc.](Unit: %)

North
S&P
Europe&ACWI
Pacific Emerging
ACWI Developed Emerging Alternative
America Middle East
Carbon(passive)(passive) (passive)(active)(active)(active)(active)(passive) (passive)(passive)

Total

Fund factors

+0.03

–0.02

+0.00

–0.00

+0.00

–0.00

+0.06

+0.16

+0.00

+0.07

+0.30

Benchmark factors

–0.05

+0.11

–0.04

–0.02

–0.01

+0.02

+0.00

+0.07

–0.04

–0.00

+0.05

*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 GPIF 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.

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Investment Results in Fiscal 2019

4 Investment in Alternative Assets

4 Investment in Alternative Assets[1] Overview

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① Investment purpose
Alternative assets have different risk-return profiles from

aforementioned characteristics and effects. Prior to starting

traditional assets such as listed equities and bonds, and areinvestment in alternative assets, GPIF carried out carefulless affected by price volatility in the public market, etc.

examinations in commissioned research projects. In

Considering these profiles, the inclusion of alternative assets

particular, the research conducted in fiscal 2012 reported

in GPIF’s portfolio is expected to improve the investmentthat the inclusion of alternative investments is expected toefficiency and contribute to the stability of pension finance.

realize investment premium for illiquidity and improve theAlso, alternative assets generally have lower liquidity

efficiency of investment through diversification. By taking

while they produce higher investment return comparedinto account the results of such research projects, GPIF has

to traditional assets. As a long-term investor managing

increased investments in alternative assets since fiscal 2017.

significant liquid assets, GPIF aims to earn excess return by

The third Medium-term Plan (from fiscal 2015 to fiscal 2019)

strategically holding alternative assets with lower liquidity inand the fourth Medium-term Plan (from fiscal 2020) stipulate

the portfolio.

investments in alternative assets (infrastructure, private

Pension funds in other countries have been promoting

equity, and real estate) up to a cap at 5% of the total portfolio.

1

diversification by investing in alternative assets for theAlternative Assets
Infrastructure

Private equity

Real estate② Investment history
Based on the results of the above-mentioned commissioned

Investment Department), employing experts, examining

research projects, GPIF has been investing in alternative

investment strategy by external advisors (since fiscal 2015),

assets through a co-investment platform with institutionaland developing a risk management framework. Considering

investors since 2013 (in infrastructure since fiscal 2013 and in

the individuality of the investment performance and the low

private equity since fiscal 2015).

liquidity of alternative assets, risk management at the time

In fiscal 2017, GPIF started calling for applications from asset

of investment evaluation and after execution of investment

managers for alternative assets through the Asset Manager

is an important issue. GPIF will strive continually to enhance

Registration System and went through the screening process

the framework for investing in alternative assets, including

for external asset managers for executing customized

risk management.

multimanager strategies* for GPIF.
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* Multi-manager strategy is an investment approach of selecting multiple funds
and an individual asset manager who invests in those funds. GPIF invests in afund-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.

30

Investment Results in Fiscal 2019

4 Investment in Alternative Assets●Alternative Investments includedin Policy Asset Mix for the third Medium-term Plan (Apr. 2015)●Appointment of external advisors for implementation (Feb. 2017)●Portfolio risk management framework●Discretionary investment mandate
formation (Mar. 2017）
for real estate (Global-Core) (Sep. 2018)●Research of alternative
investment schemes (Mar. 2013)

FY
2013

FY
2014

FY
2015

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

FY
2016

FY
2017

FY
2018

●Emerging Markets PE co-investment●Call for applications of asset
program with IFC (Jun. 2015)
managers (Apr. 2017)●Appointment of external advisors for●Discretionary investment mandate forinvestment strategy planning (Oct. 2015) real estate (Japan-Core) (Dec. 2017)●Discretionary investment mandates forinfrastructure (Global-Core) (Jan. 2018)

FY
2019●Appointment of asset
managers for global
private equity(Mar. 2020)③ Activities in fiscal 2019
A. Call for application, selection of Gatekeepers and Fund of Funds managers
Following on from last year, GPIF called for applications fromTo select asset managers, a GPIF team conducts several

external asset managers in alternative assets by utilizing therounds of screening, including application documents

Asset Manager Registration System and went through thecheck, interviews, and on-site visits with external advisors

screening process to select external asset managers thatto carefully examine the capabilities, investment strategies,

execute customized multi-manager strategies for GPIF.

investment track record, and risk management system, etc. ofWith an addition of external asset managers for private

the prospective managers.

equity investments, multi-manager strategies are set to be
executed for all of the three alternative asset types.
(Example) Infrastructure investment scheme
discretionary
investment
managementagreement

GPIF
Allocate capital based on investment
decision by asset managers

investment

investment
management

Fund of Funds

Asset Managers

Gatekeeper

Fund of Funds
Manager

Selected by
GPIF to execute
multi-manager strategy

diversified through multiple funds

Infra Fund A

Infra Fund B

investment

investment

Infra Asset A

31

Infra Asset B

Infra Asset C

Infra Asset D(Note) Investments in private equity and real estate areor will be executed based on similar investment
scheme.

Investment Results in Fiscal 2019

Total value of alternative assets up until fiscal 2019

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 2020 is ¥944.5
billion (0.61% of the total value of the pension reserve¥billion

1,200
Real estate (Discretionary investment)

1,000fund). Investments are conducted based on a discretionary
investment management agreement. Appointed asset
managers invest in funds in accordance with the pre-agreed

4 Investment in Alternative Assets

944.5

Infrastructure (Discretionary investment)
Private equity (In-house)

800

Infrastructure (In-house)

380.8

1

600

guidelines that define investment objectives, strategies, andcertain restrictions, etc.
After the start of investment, GPIF receives a periodic

432.7
400

124.9

213.0
200

report on the status of portfolio assets and monitors theperformance and risks. In addition, GPIF conducts annual

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83.3
0.2

5.5

1.9
81.4

2014/3

2015/3

2016/3

100.6
4.2
96.4
2017/3

8.1
50.0
8.2
146.7

2018/3

390.4

148.8
14.3

18.5

144.8

154.7

2019/32020/3comprehensive evaluation of external asset managers, andproperly manages investment by confirming that their fundmanagement team composition has not changed and bymonitoring the progress of their investment plans.
B. Development in preparation for investment in limited partnerships (LPs)
By revising Ordinance for Enforcement of the GPIF Act ingenerally adopted by institutional investors including

September 2017, interests in limited partnerships (LPs)pension funds in other countries to invest in alternative

as limited partners were added to the securities in whichassets. Following the revision of the Ordinance, GPIF started

GPIF may invest directly. The expected benefits of directly

preparation for such investments including developing

investing in LPs include faster access to information ona risk management framework, etc. from fiscal 2017. In

investees, improvement of net returns, and enhancing

fiscal 2019, GPIF continued such preparation including

risk management through simplified investment scheme

the enhancement of quantitative monitoring based on awith fewer intermediaries involved between investors andperformance indicator and investment size.

investees. Therefore, such investments in LPs have been

[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 in othercountries.
Currently, GPIF mainly focuses on core infrastructure, which is essential for social and economic activities under awell-established regulatory environment by the authorities andthat can be expected to generate stable usage fees, etc. basedon long-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 otherinvestors and other means.

32Investment Results in Fiscal 2019

4 Investment in Alternative Assets② GPIF’s investment
A. Investment approach
GPIF aims to achieve stable returns mainly 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 schemes
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 Canadianpublic 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 core infrastructure assets in developed countries since February
2014.
(ii) Discretionary investment
In fiscal 2019, GPIF continued to commit to the following funds, and the funds constructed diversified investment portfolios
focused on core infrastructure assets.
Asset manager name

Investment style

Start of investment

Gatekeeper: Sumitomo Mitsui DS 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.

C. Investment status
The total value of GPIF’s infrastructure investment as of theend of March 2020 was ¥545.1 billion.
The breakdown of portfolio by country shows the UK withthe largest share at 33%, followed by the U.S. at 17% andAustralia at 13%. As for the breakdown of the portfolio by
infrastructure assets sector, the largest share went torenewable energy at 22%, followed by airport at 15% andport at 13%. GPIF expects stable revenue to be generated

mainly from its diversified core infrastructure portfolio.
Internal rate of return (IRR) from the foreign infrastructure
investment stood at 3.68% in USD terms, and IRR from thedomestic infrastructure investment stood at 1.57% in JPY
terms since its inception in February 2014. The total dividend(excluding repayment of principal) received from a unit trustand fund of funds during the previous fiscal year was ¥6.5
billion.

Value by country

Value by asset type
Others 4%

Canada5%

Energy 5%

OthersTransportation5%

7%

France5%

UK

SwedenCommunication

7%

33%

6%

Renewable Energy

22%

Water Supply
and Sewerage

Spain

Airport

9%

7%

15%

Japan

8%

U.S.
Australia

13%

17%

Utility (Electricity/Gas)10%
Gas/Oil Pipeline10%

33

Port

13%

Investment Results in Fiscal 2019

4 Investment in Alternative Assets【Infrastructure investment case 1】
Toll road operating company —Spain—
GPIF has participated in a co-investment opportunity for a toll road system in south Spain with an infrastructure fundthat mainly invests in infrastructure assets in Europe. With a total length of 105 km, the road is located at the coretransportation corridor of the country, significantly reducing the time taken compared to an alternative route. The
investee’s revenue comes from the toll collected based on a stable concession system.

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【Infrastructure investment case 2】
Railway infrastructure company —Australia—
GPIF has invested in a rolling stock company through an infrastructure fund that mainly invests in infrastructure assets
in Australia. The investee company initially was contracted to perform the designing, manufacturing, operation andmaintenance of trains on the routes operated by a public railway company in Sydney. Such trains have already been
designed and manufactured, and operation and maintenance are under way. The investee company is expected to earnstable revenue based on a long-term contract with the public railway company.

34

Investment Results in Fiscal 2019

4 Investment in Alternative Assets【Infrastructure investment case 3】
Solar power generating facility —Japan—
GPIF has invested in an infrastructure fund that has a mega solar plant constructed on the abandoned golf course. The
generated power is purchased under a feed-in tariff scheme, and the plant is expected to earn stable revenue over thelong term. A facility next to the plant offers visitors a view of more than 122,000 solar panels, and plant is open to the local
residents and visitors for viewing the site.

[3] Private equity① Overview
In private equity, GPIF invests primarily in funds with focus(providing capital for growth and expansion of companies),

on equities of private companies (private equity, or “PE”

Venture capital funds (investing in start-up and early stage

funds). PE funds generally seek investment opportunities

companies, etc. for growth potential), Turnaround funds

in companies at various development stages while(seeking opportunities to turn around companies facing

diversifying investment timing. Types of PE funds include

financial challenges through balance sheet restructuring,

Buyout funds (seeking to create enterprise value of investeeetc.), and Private debt funds (investing in debt instruments ofcompanies by improving post-investment management

private companies). GPIF makes diversified investments in PE

practices and corporate governance), Growth equity funds

funds of these types.

② GPIF’s investments
A. Investment approach
GPIF makes diversified investment in PE funds that primarily invest in equities of private companies at various stages ofcorporate development, such as start-up, growth, expansion, and turnaround, with the aim of acquiring relatively higher
investment returns driven mainly by enterprise value creation, and contributing to the improvement of GPIF’s overall portfolio
returns.

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Investment Results in Fiscal 2019

4 Investment in Alternative Assets

B. Investment objectives and schemes
GPIF will invest in PE funds that invest in equities (private equity) 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

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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 2019, GPIF completed the selection process of the following program.
Asset manager name
Gatekeeper: Neuberger Berman East Asia Limited
Fund of Funds Manager: NB Alternatives Advisers LLC

Investment style

Start of investment

Global-Diversified
Strategy

April 2020

C. Investment status
The total value of GPIF’s private equity investment as ofand consumer staples, as well as the health care. Internal rate

the end of March 2020 was ¥18.5 billion. Looking at theof return (IRR) from the private equity investment stood atbreakdown of investee companies by country/region, the

4.03% in USD terms since its inception in June 2015. For theinvestment portfolio is diversified into various emerging

next step, GPIF plans to expand its diversified investment

countries mainly in Asia including China. By sector, theportfolio by investing primarily in developed countries

portfolio is diversified into various sectors including thethrough discretionary investment agreements with external

consumer-related sectors such as consumer discretionary

managers for the multi-manager strategy.

Value by country/region
North America

Latin America 8%

4%Value by sector

Industrials
Europe

8%

China

36%

Middle East/Africa

Others 0%

Energy 1%
Materials 2%
Communication
Services 4%9%Consumer
Discretionary

22%

Financials

10%
Health Care

Information
Technology

24%
India

11%

17%

18%
Consumer
Staples17%

Other Asia 9%36

Investment Results in Fiscal 2019

4 Investment in Alternative Assets(Column) J-Curve effect of private equity investment
In general, private equity (PE) fund investments deliver negative returns in the early years, and then deliver investment
returns gradually. Since the progression of cumulative investment earnings appears as a “J” shape on a time-series graph,the phenomenon is called the “J-Curve effect.”
This is due to the characteristics of PE funds investment that payment of fees and start-up costs in the early years in thefund life prior to high returns to the investor as the portfolio companies increase in value.
PE fund investment incurs various fees and costs, including organizational costs which directly affect performance in earlyyears. Since PE funds target companies in various industries, jurisdictions, and taxation systems, fees paid to legal,
accounting, and taxation professionals tend to be costly. In a multi-manager strategy implemented in the form of adiscretionary investment management since 2017, GPIF invests in multiple individual funds via a fund-of-funds under the
instruction of a Gatekeeper, which is slightly more costly investment structure compared to investing directly toindividual funds. However, highly expertized services such as individual fund manager selection and portfolio monitoring
performed by Gatekeepers and Fund of Funds are critical for properly managing and for adding value to pension assets
on behalf of Japanese public. In addition, it requires a lot of time and efforts to manage PE portfolio which produce
higher investment returns, and compensations paid to asset managers are also higher in general than those paid to theasset managers of public stocks and bonds. GPIF aims to lower the proportion of fixed compensations, while aligning theinterest of external asset managers and asset owners by increasing the proportion of performance-based compensation.
GPIF will constantly make efforts to reduce administrative costs.
With regard to investment returns produced by the PE funds, it generally takes several years from when the fund starts
management, identifies investee companies, makes capital contributions, and deliver investment gains as the portfolio
companies eventually mature and are exited. PE funds make an investment decision only after conducting an extensive
business due diligence and financial analysis of potential investee companies and establishing a mutual trust with thecompanies’ top executives. After executing an investment, PE funds help expand the investee companies’ business anddevelop a governance system to allow the investee companies to achieve sustainable growth and gain enterprise value
substantially.
In overseas countries, especially in the U.S., PE funds have over forty years of history and have delivered investment
returns outperforming public stock indices in the long run, while they are still relatively uncommon in Japan. Many of thepension funds that focus on long-term returns understand these return profiles of PE funds and invest in them.

[4] Real estate① Overview

37

GPIF’s real estate investment focuses on real estate funds

considering the fact that the real estate market has cycles

that hold properties such as offices, retails, multi-family, and(prices fluctuate according to supply and demand and thelogistics.

financial market, etc.) and each investment amount/units

GPIF implements “core-style” investment strategy, whichtends to be relatively large. At the same time, it is necessary

is expected to generate continuous and stable rental

to engage asset managers and/or property managers, etc.

income from tenants, and this strategy has been adopted

to sustain asset value over the long term. GPIF promotes

as the major investment strategy by pension funds in otherinvestments in a careful and strategic manner, taking

countries. In the meantime, it is important to diversify the

into account the above-mentioned profiles of real estatetiming of investment and the type of investment products,

investment.

Investment Results in Fiscal 2019

4 Investment in Alternative Assets② GPIF’s investments
A. Investment approach
GPIF aims to achieve stable returns mainly from investment income in a timely and efficient manner, in consideration of various
market conditions with the focus on diversified core real estate funds.
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.

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(i) Discretionary investment
In fiscal 2019, GPIF has been building a diversified investment portfolio focused on its core-style investment strategy, withan external investment manager for foreign real estate, which was newly selected in fiscal 2018, in addition to an external
domestic investment manager selected in fiscal 2017.
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 2018

C. Investment status
The total value of real estate investment as of the end ofmanaging the portfolio is 5.97%(yen-denominated), while

March 2020 was ¥380.8 billion.

that of foreign real estate investment since September 2018

As for the breakdown of real estate investment portfolio by

is 4.88%(U.S.dollar-denominated). Dividend received fromcountry, Japan accounted for the largest share at 49% of thethe Fund of Funds in fiscal 2019 (excluding repayment of

total portfolio. This was followed by foreign real estate

principal) was ¥3.5 billion in total. We will continue investing

investment including the U.S. (32%), Australia (7%), andin real estate funds, while paying attention to the market

France (4%), which GPIF started managing through newly

circumstances, advised by external consultants.

selected foreign asset managers since fiscal 2018. As for the

In addition, in fiscal 2019, GPIF joined GRESB as a Real Estate

breakdown by property type, logistics accounted for theInvestor Member. GRESB, an initiative established mainly bylargest share at 31% of the total portfolio, followed by office

the pension funds in Europe, provides an ESG assessment

at 26%, multi-family at 22%, and retail at 16%. The

standard for real estate and infrastructure investment. GPIF

investment is diversified focused on core-style real estate

will discuss with managers to promote them to actively use

funds in advanced countries.

GRESB assessment to enhance the disclosure of ESG

Internal Rate of Return (IRR) of domestic real estate

information and constructive dialogue across the market.

investment since December 2017 when GPIF star ted
Value by country

Value by property type
Others 5%

France4%

Others9%Australia

Retail7%

16%

Logistics

31%

Japan

49%
U.S.

32%

Multi-family

22%
Office26%

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Investment Results in Fiscal 2019

4 Investment in Alternative Assets【Real estate investment case 1】
Office —Europe—
GPIF has invested in a fund that owns a diversified portfolio of assets comprising of several office properties located in
major cities in Europe, including London and Paris. The fund takes the form of joint investment with institutional investors
representing the U.S. and Europe, structured to favor long-term investment. Holding properties are operated withconsideration to sustainability through the efforts to reduce energy consumption and carbon emissions.

※ The office area in London (The fund invests in the property in the front center of the above photo.)【Real estate investment case 2】
Office —Japan—
GPIF has invested in a fund that owns the office portion of a newly completed large mixed-use facility (including culturaland retail) located in the central area of Shibuya-ward, Tokyo. The property has a long-term lease agreement with a major
IT company and its group companies.

※ The central area in Shibuya-ward, Tokyo (The fund invests in the office portion i.e., upper part of the property in the center of the above photo.)

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Investment Results in Fiscal 2019

4 Investment in Alternative Assets【Real estate investment case 3】
Logistics —Europe—
GPIF has invested in a fund that has logistics facilities located in European countries. The fund primarily invests inmarket where facilities located in major metropolitan areas and key distribution junctions. The property held throughthe fund is granted WELL Certified™ Gold, a certification for a facility which gives consideration to employees’ health andcomfort.

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【Real estate investment case 4】
Logistics —Japan—
GPIF has invested in a fund that has large logistics facilities including one in Kawasaki-city, Kanagawa under a long-termlease agreement with a major logistics company. Demand for logistics facilities is rapidly growing with the expansion of
e-commerce, and a large-scale logistic facility located close to the mega consuming area of central Tokyo has acompetitive advantage due to the scarcity of supply pipe-line.

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Investment Results in Fiscal 2019

4 Investment in Alternative Assets【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 2020 was ¥33.1 billion.
Portfolio holdings of private REIT as of the end of March 2020
Private REIT name

Asset manager name

SG ASSETMAX-REIT

SG ASSETMAX CO., LTD.

3.3

DBJ PRIVATE INC.

DBJ ASSET MANAGEMENT CO., LTD.

1.8

DREAM PRIVATE REIT INC.

DIAMOND REALTY MANAGEMENT INC.

8.6

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

4.1

NIPPON TOCHI-TATEMONO PRIVATE REIT INC.

NITTOCHI ASSET MANAGEMENT CO., Ltd.

2.0

NOMURA REAL ESTATE PRIVATE REIT, INC.

NOMURA REAL ESTATE ASSET MANAGEMENT
CO., LTD.

4.3

BROADIA PRIVATE REIT, INC.

TLC REIT MANAGEMENT INC.

4.6

MITSUI FUDOSAN PRIVATE REIT INC.

MITSUI FUDOSAN INVESTMENT ADVISORS, INC.

4.5

Total
* Funds are listed in the order of the Japanese syllabary.
* The names of funds are as of the end of March 2020
* The figures above are rounded off, so the sum of each item does not necessarily match the total number.

41

Market value(¥billion)

33.1

Investment Results in Fiscal 2019

4 Investment in Alternative Assets[5] Portfolio risk management
In addition to the implementations and improvements madeperformance indicator and investment size, etc. which enabled

to date, GPIF continuously enhanced our risk managements in

GPIF to conduct more comprehensive and elaborate risk

fiscal 2019 including quantitative monitoring based on a

management.

< 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

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

Checks&Balances

Entire portfolio risks

Collaboration
Typical items specificto alternative assets

Alternative
investment
specific risks■ Expertise of asset managers specific to asset class■ Organizational stability suitable for long-term

investment

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■ Validity of fair value measurement, etc.

(Note) Above items are especially critical foralternative investments with lower liquidity.

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

Wi t h r e s p e c t t o CO V I D - 1 9 i m p a c t s o n a l t e r n a t i v eMoreover, GPIF analyzes macroeconomic slowdowns andinvestments, GPIF requests each external asset manager tochanges in the long-term supply-demand structure andanalyze and report impacts on its investment portfolio. We

trends from various perspectives, and continuously monitors

focus on sectors that would be directly affected by global

an investment plan of each external asset manager from alimitations on the transfer of personnel and goods, andlong-term perspective.

captures impacts and risks in a timely manner.
(Note) With respect to the basic policy of GPIF’s entire portfolio risk managements including alternative assets, refer to page 21-25.

42

Investment Results in Fiscal 20195 Review of the Policy Asset Mix

5 Review of the Policy Asset Mix[1] New policy asset mix
GPIF establishes the policy asset mix formed by the target
allocation to each asset class, and manages portfolio within
deviation limits. GPIF formulated the new policy asset mix
for the fourth Medium-term Plan (five-year plan), whichstarted in fiscal 2020. This formation took place for the firsttime since the unification of the Employee’s Pension
Schemes as well as the establishment of the Board ofGovernors.
The new policy asset mix shall meet GPIF’s investment
objectives, a real investment return (net investment yields

on the pension reserve fund less the nominal wage growthrate) of 1.7% with minimal risks. In addition to the fourdeviation limits set for each asset class, new deviation limits
for total bonds and total equities have been established inorder to strengthen risk management on the equities.
(Note) For details of the new policy asset mix based on the fourth Medium-term
Plan and previous policy asset mix, refer to GPIF’s website at https://www.gpif.go.jp/gpif/portfolio.html.

【New policy asset mix】
(From April, 2020)(Unit: %)Target allocation
Deviation
limitsAsset class

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

25

25

25

25

±7

±6

±8

±7

Bonds/Equities

±11

±11

(Note 1) Alternative assets (infrastructures, private equities, real estates, and other assets determined through resolutions at the Board of Governors) will be classified
into domestic bonds, domestic equities, foreign bonds, and foreign equities based on their risk and return profiles, and will be capped to 5% of total assets.
However, if economic and market conditions prevent compliance with the 5% ceiling rule, this limit may be raised after deliberation and resolution by the
Board of Governors.
(Note 2) JPY hedged foreign bonds and yen-denominated short-term assets are classified as domestic bonds, while foreign currency-denominated short-term assets
are classified as foreign bonds.
(Note 3) In light of recent extreme economic and market volatility, GPIF may be allowed to flexibly manage investments based on an appropriate, reasonably grounded
outlook for the market environments and subject to the deviation limits for the policy asset mix.

【Previous policy asset mix】
(April, 2006 - June, 2013)
(Unit: %)Domestic bonds Domestic equities

Foreign bonds

Foreign equities Short-term assets

Target allocation

67

11

8

9

5

Deviation limits

±8

±6

±5

±5

—

(June, 2013 – October, 2014)
(Unit: %)Domestic bonds Domestic equities

Foreign bonds

Foreign equities Short-term assets

Target allocation

60

12

11

12

5

Deviation limits

±8

±6

±5

±5

—

(October, 2014 – March, 2020)
(Unit: %)43

Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Target allocation

35

25

15

25

Deviation limits

±10

±9

±4

±8

Investment Results in Fiscal 20195 Review of the Policy Asset Mix[2] Background of the formulation of the policy asset mix
Japanese public pension scheme (Employees’ Pension
Insurance and National Pension) is a pay-as-you-go system
in which pension premiums collected from working
generations suppor t elderly generations. Given thedecreasing birthrates and aging populations in Japan,
funding pension benefits solely by contribution fromworking generations would place an unduly excessive
burden on this group. The pension reserve fund managed by
GPIF will therefore be used to supplement payouts for future
generations.

Under this framework, the Ministry of Health, Labour andWelfare carries out a financial verification at least every five
years based on the outlook for population and economic
trends. The most recent verification conducted in 2019
included an analysis of six broad scenarios. The verification
focused particularly on Total Factor Productivity (e.g.
technological advances or productivity improvements),
which is a critical factor in making long-term economic
assumptions. The result was used as a basis of the target
return on investments of the reserve fund, etc.

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Economic assumptions in the financial verification
Total factor
productivity (TFP)
growth rate

1.2%
Growth scenario(Cabinet Office estimate)

ScenarioV

ScenarioVI

CabinetOfficeestimate
for the basescenario

Neither
economic
growth nor
increasing
labor force
participation

Assumes partial
economic growth andincreasing labor force
participation
Assumes neither
economic growth nor
increasing labor force
participation

Long-term average

Assumed future state of theeconomyPartialeconomic
growth andincreasing
labor force
participation
scenario

Assumes economic
growth and increasing
labor force participation

2029

Current period(in accordance with Cabinet Office estimates)

ScenarioIV

0.6%

Scenario VI 0.3%

2028

Economic
growth andincreasing
labor force
participation
scenario

1.1%

Scenario V

0.3%

CabinetOfficeScenario
estimate forII
the growth
Scenario scenario
III

Scenario II

Scenario IV 0.8%

Base scenario(Cabinet Office estimate)

ScenarioI

1.3%

Scenario III 0.9%

0.8%

Labor force
participation
rate

Scenario I

Economic assumptions(Reference)

Rate of return on
Total factor
investment
Real wage
productivity
CPI increase rate
growth rate
SpreadReal(TFP) growth(adjusted for CPI) (adjusted for (adjusted for
rate
wages)CPI)

Real economic
growth ratefrom FY2029
20–30 years

1.3%

2.0%

1.6%

3.0%

1.4%

0.9%

1.1%

1.6%

1.4%

2.9%

1.5%

0.6%

0.9%

1.2%

1.1%

2.8%

1.7%

0.4%

0.8%

1.1%

1.0%

2.1%

1.1%

0.2%

0.6%

0.8%

0.8%

2.0%

1.2%

0.0%

0.3%

0.5%

0.4%

0.8%

0.4%

–0.5%

(Note) D etails of 2019 financial verification are posted on the MHLW website at https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/nenkin/nenkin/zaiseikensyo/index.html.

44

Investment Results in Fiscal 20195 Review of the Policy Asset Mix[3] Details of policy asset mix formulation① Considerations in the Medium-term Objectives
It is commonly known that, in a long-term investment,
maintaining a basic asset composition (a policy asset mix)
over the long term yields a better result effectively, rather
than changing the asset composition in response to shortterm market developments. Accordingly, public pensions’funds shall be managed with consideration to an expected
rate of return and risks of individual asset classes, based on
an asset allocation theory (policy asset mix) that forms thebasis of reserves managements.
The fourth Medium-term Objectives for the five-year period
from fiscal 2020 to fiscal 2024 established by the MHLW
include the following investment objectives of reserve fund:A. B ased on the results of the financial verification, GPIF
would formulate and manage the policy asset mix withthe objective of achieving a long-term real return of 1.7%
(net investment yield on the pension reserve fund less thenominal wage growth rate) on reserve assets with theminimal risks.
B. T he policy asset mix must be formulated from a longterm perspective and it should incorporate generally
recognized asset management expertise, domestic andoverseas economic trends, and forward-looking risk
analysis.
C. The downside risks of underperforming the nominal wage
growth rate cannot exceed the portfolio comprised solelyof domestic bonds, and appropriate consideration should
be given to the fact that the downside risks for equities
may be larger than expected. The probability that planned
reserves may become smaller than originally anticipatedshould be properly accounted for and a thorough analysis
of multiple risk scenarios should be conducted.

② Policy asset mix formulation process
Based on the results of the financial verification, the Medium-term Objectives, and recent economic conditions, GPIF decided on
the following policies when formulating the new policy asset mix.
A. GPIF used multiple methods to estimate expected returns rather than a single method in order to enhance estimate
precision. In addition to the previous method, GPIF has also taken into accounts the equilibrium return deemed intrinsic
to market capitalization.
B. Current policy benchmarks (See Note) were used to estimate expected returns, as well as correlations between risks andreturns. Since GPIF refers to the assumptions made within the financial verification during the portfolio optimization
process, the estimation period for expected returns was set at 25 years, considering the models used within the financial
verification to formulate long-term economic assumptions generally use a period of 25 years.
C. Given that the return target set within the Medium-term Objectives is a real return of 1.7%, that is, the return target set
under Scenario III, GPIF used Scenario III as the economic scenario for the basis for wage increase assumptions whensetting wage-adjusted expected returns.
D. The improved estimation method for expected returns enhances the accuracy of the optimization and is likely to resultin a better target allocation, therefore, GPIF decided to eliminate constraints (such as relative asset class size, etc.), except for return requirements.
E . As the same before, the risk constraint used in the optimization included the requirement that the risks of the new policy
asset mix falling below the nominal wage growth rate (lower partial probability) does not exceed those of a portfolio
comprised solely of domestic bonds. GPIF also used the average nominal wage increase shortfall rate (conditional average shortfall rate) to measure the risks when optimizing the portfolio.
F. Looking at the reserves assets’ nominal accumulation trends within the financial verification, while asset sizes will peakout at different points in different scenarios, GPIF expects that the investment policy can be maintained without reducing the reserves principals for the next 50 years or so. The peak of the size of nominal reserve assets is a critical point
in investment operations, as it means that investment returns alone will not be able to cover cash payouts. Given that,GPIF analyzed reserves assets trends based on the new policy asset mix over the next 50 years, and compared them withplanned reserve assets within the financial verification.
G. Furthermore, in light of the current low interest rates environments, yen-denominated short-term assets and JPY
hedged foreign bonds are all classified as domestic bonds throughout the policy asset mix formulation process, as theseassets are considered to have similar risk and return profiles to that of domestic bonds. In addition, foreign currency-denominated short-term assets are counted as foreign bonds.
(Note) GPIF refers to a benchmark used for the policy asset mix formulation as a policy benchmark. The policy benchmarks used for each asset class are as follows:

Asset class45

Policy benchmark

Domestic bonds

NOMURA-BPI (excluding ABS)

Foreign bonds

FTSE World Government Bond Index (not incl. JPY, no hedge/JPY basis)

Domestic equities

TOPIX (incl. dividends)

Foreign equities

MSCI ACWI (not incl. JPY, JPY basis, incl. dividends)

Investment Results in Fiscal 20195 Review of the Policy Asset Mix③ Expected return of each asset class and assumption for the wage growth rate
GPIF projected expected return of domestic bonds bytaking the average return rate calculated within the bonds
investments simulation (which assumes different future
long-term interest rates scenarios), and combined thiswith the equilibrium return rate (See Note 1) deemed
intrinsic to market capitalization. To estimate expected rates
of returns on domestic equities, foreign bonds, and foreign
equities, GPIF used a building block method (See Note 2) for
each asset that adds a risk premium to short-term interest

rates, and combined this with the equilibrium return rate
deemed intrinsic to market capitalization. The expected
return for short-term interest rates which forms the basis forcalculations is estimated using the market yield curve.
The nominal wage growth rate used to convert nominal
expected return to wage-adjusted real return was 2.3%,
which is the average future nominal wage increase used in
the economic assumptions within the financial verification(in Scenario III).

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(Note 1) The equilibrium return rate is the implied market return derived by observing current indicators such as global market capitalization and risk and correlations
for each asset class.
(Note 2) The building block method estimates expected return for each asset class by adding together estimates for expected short-term interest rates and the risk
premium (i.e. compensation for taking risk) for each individual asset class. Historical data for policy benchmarks were used to estimate risk premiums.

【Expected return for each asset class and the wage growth rate】
(Unit: %)Short-term interest rate

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

–1.7

–1.6

0.3

3.3

4.9

(0.6)

(0.7)

(2.6)

(5.6)

(7.2)

Wage growth rate
(2.3)

(Note) The numbers in the upper line indicate real returns, those in brackets in the lower line indicate nominal returns with wage growth rate.

④ Standard deviation and correlation of each asset class
GPIF estimated risks and correlations of each asset class by using the annual data of the policy benchmarks for the past 25 years
after the bubble economy collapsed in Japan.
[Risk (Standard deviation)]
(Unit: %)Standard deviation

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

Wage growth rate

2.56

11.87

23.14

24.85

1.62

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

Wage growth rate

[Correlation]

Domestic bonds

1.00

Foreign bonds

0.290

1.00

Domestic equities–0.158

0.060

1.00

Foreign equities

0.105

0.585

0.643

1.00

Wage growth rate

0.042

–0.010

0.113

0.099

1.00

(Note) The expected return of a portfolio including several different assets with different risk-return profiles is the weighted average of the expected returns ofindividual assets, while risk (standard deviation) of the portfolio can be lower than the weighted average of those of the individual assets. This is called the“diversified effect.” GPIF aims to achieve a stable investment result by diversifying the investments into multiple types of assets having different characteristics
and price movements. For details, refer to GPIF’s website at https://www.gpif.go.jp/gpif/.

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Investment Results in Fiscal 20195 Review of the Policy Asset Mix⑤ Selection of policy asset mix
We selected the new policy asset mix from the following perspectives.
A. Based on the returns, risks, and other factors of the four asset classes, GPIF identified a variety of portfolios andestimated its projected returns, risks (standard deviations), probability in which portfolio return will short of nominal
wage growth rate (“lower partial probability”) and the average rate of shortages when return cannot meet the nominal
wage growth rate(“conditional average shortfall rate”).
B. Among a variety of portfolios simulated, we selected a portfolio which meets the investment objectives (nominal wage
growth rate plus 1.7%) with ‘the lower partial probability’ smaller than that of the reference portfolio where all areinvested in domestic bonds, and the smallest “conditional average shortfall rate”.

We continued to apply the currently used 5% interval to compose the new policy asset mix. GPIF has also confirmed that the newpolicy asset mix should fall within the range of the reference asset mix.
[New policy asset mix profile]
(Unit: %)Real return

Nominal return

Standard deviation

Lower partial
probability

1.7

4.0

12.32

44.4

Conditional average shortfall rate
Normal distribution Empirical distribution (Note)
9.2

10.9

(Reference) Profiles of all-domestic-bond portfolio
–1.6

0.7

(Unit: %)

2.56

70.7

3.0

3.0

(Note) We also conducted a simulation for the conditional average shortfall rate by using the empirical distribution, in addition to the normal distribution, withconsideration that equities may have a larger downside probability (tail risk). The empirical distribution is a projection based on real returns over the past 25 years.

⑥ Risk verification for new policy asset mix
In order to verify the magnitude of the risk where reserve
assets fall below the size of planned reserves under pension
finance, we conducted a Monte-Carlo simulation overone million times using the expected returns, standard
deviations, and correlations for each asset to generate a
distribution of such trends, and examined results comparedto planned reserves on the financial verification (Scenario III),in a bid to test and verify the new policy asset mix.

Results indicate that the probability (risk) where fund size
fall below the planned level has declined compared to theformer policy asset mix. Meanwhile, a simulation conductedwith an all-domestic-bond portfolio resulted in always
smaller compared to the planned reserve assets.
From the above-mentioned overall perspectives withthe aspects of lower partial probability and conditional
average shortfall rate, the new policy asset mix is the mostefficient portfolio to meet the investment objectives while
minimizing downside risk.

Comparison with planned reserves
Pension reserves(¥trillion)

1,500
New policy asset mix

1,200

All-domestic-bond portfolio
Reserve asset that the financial
verification assumes
Previous policy asset mix

Probability (risk) of falling
below planned reserves
75thpercentile

In 25 years

900(As of the end of FY2043) (As of the end of FY2068)
Median600

300

25thpercentile
25thpercentile

0
2020

47

(Unit: %)In 50 years

2025

2030

2035

2040

Median2045

75thpercentile

2050

2055

New policy asset mix

38.1

39.8

All-domestic-bondportfolio

100.0

100.0

Previous policy
asset mix

2060

2065 (FY End)

(Unit: %)(Reference)

40.0

43.0

Investment Results in Fiscal 20195 Review of the Policy Asset Mix⑦ Implementation of stress tests
GPIF conducted multiple stress tests under the assumption

Results in both scenarios indicate that the cumulative valueof the occurrence of a financial crisis. The stress tests wereof real return temporarily falls, but turns upward to the level

conducted based on the respective scenarios using actualof expected return following a subsequent market reboundmarket data in the aftermath of the global financial crisis inseveral years later.

2008 and the dot-com bubble burst in 2000.

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[Actual and estimated real return (cumulative)]
%
120

80

Actual rate of return
Expected real return under the New policy asset mix
Stress Scenario (the Global financial crisis)
Stress Scenario (the Dot-com bubble burst)

GPIF Investment Results(annualized 2.87%)

40

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
(FY)

• The negative returns with the largest annual loss over the test periods were -19.4% in the scenario of the global financial
crisis and -11.4% in the scenario of the dot-com bubble burst.
• We also observed the probability of the occurrence through the empirical distribution in the stress scenario. We
assessed that a loss equivalent to the aftermath of the global financial crisis would occur once every 70 years, while thatsimilar to the aftermath of the dot-com bubble burst would be observed once every seven years.
(Note 1) GPIF’s investment results (annualized return of 2.87%) are based on the figures as of the end of fiscal 2018.
(Note 2) The figure for fiscal 2019 represents the result as of Dec. 31, 2019.

(Column) Reference asset mix
Since the unification of the Employee’s Pension Schemes in October 2015, four asset management entities-GPIF,
the Federation of National Public Service Personnel Mutual Aid Associations, the Pension Fund Association for Local
Government Officials, and the Promotion and Mutual Aid Corporation for Private Schools of Japan-are assumed tojointly formulate a reference asset mix. When formulating the policy asset mix, each of the four entities shall take into
consideration the reference asset mix.
The reference asset mix shall be reviewed upon a financial verification by the government and revised accordingly. After the2019 financial verification was disclosed, the four entities discussed and formulated a new reference asset mix as follows:(Unit: %)Asset class

Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Reference asset mix

25

25

25

25

The range of median

±4

±4

±4

±4

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Investment Results in Fiscal 2019

6 Stewardship Responsibilities

6 Stewardship Responsibilities[1] Objec tives and significance of stewardship ac tivities
years) to bridge the intergenerational gap of contribution,
it is essential for GPIF to minimize negative externalities ofcorporate and government activities (environmental andsocial issues, etc.) and to promote steady and sustainablegrowth of the overall capital market as well as its underlying
society. Except for some investment products, GPIF makes
daily transactions and investments, and exercises voting
rights, via external asset managers. Therefore, GPIF, as auniversal owner and a cross-generational investor, contributes
to the sustainable growth of the overall capital markets
and promotes constructive dialogues (engagement) in
consideration of ESG factors that contribute to sustainablegrowth between external asset managers and investee
companies/issuers. Improvement of long-term corporate
value would lead to the growth of the overall economy,
which will eventually enhance our investment returns. GPIF
shall fulfill our stewardship responsibilities by promoting
engagement and building a win-win environment in theinvestment chain.

In its Investment Principles and the Code of Conduct, GPIF
stipulates that we promote activities to fulfill our stewardship
responsibilities (hereinafter “stewardship activities”) withthe objectives of appropriately fulfilling our responsibilities
to pension beneficiaries, as their fiduciary, and increasing
investment returns over the long term. The Investment
Principles were partially amended in October 2017 to
stipulate that ESG (environmental, social and governance)
factors should be taken into consideration in stewardship
activities.
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 p
responsibilities to pension beneficiaries, while external
asset managers entrusted with investment by GPIF assume
stewardship responsibilities to GPIF.
“Universal owner” and “cross-generational investor” are thekey terms for GPIF to fulfill our stewardship responsibilities
appropriately. As a “universal owner” (an investor with avery large fund size and a widely diversified portfolio) anda “cross-generational investor” (responsible for supporting
pension finance with an investment horizon of as long as 100

Government Pension Investment Fund, Japan (GPIF)

Fiduciary duty
Stewardship responsibility

Entrust funds

Contribute premiums

Fiduciary duty

(via Pension Special Account)

Stewardship responsibility

Employer

IR(Investor Relations)Improve long-term returns(For listed companies)

Engagement

Corporate governance code

External asset
managerCompany

Stewardship code

Stewardship
activities

Enhance long-term corporate value

Sustainable growth of the economy[2] Progress in and foundation of stewardship ac tivities
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 long term for pension beneficiaries by conducting
various activities to fulfill its stewardship responsibilities
in equity investment. In September 2015, GPIF signed the49

Principles for Responsible Investment (PRI) introduced by
the United Nations, as part of GPIF’s efforts to enhance
ESG implementation. In October 2017, GPIF revised theInvestment Principles to expand the scope of stewardship
activities to cover all asset classes, as it had been focused onequity investment, and made it clear that ESG factors should
be considered in conducting stewardship activities.

Investment Results in Fiscal 20192014
May 2014
Accepted Japan’s
Stewardship Code.
Established “Policy to
Fulfill StewardshipResponsibilities.”

2015-16
March 2015
Established “Investment Principles.”Stewardship activities in equity investment.

September 2015
Signed “Principles for Responsible
Investment (PRI).”
Enhanced initiatives for ESG.

July 2016
Established “Business and Asset Owners’
Forum” and “Global Asset Owners’
Forum.”
Exchange of opinions on stewardship, ESG,etc.

2017-18
June 2017
Established “Stewardship
Principles” and “Proxy Voting
Principles.”Requested compliance from asset
managers for equity investment.

August 2017
Agreed to the revised Japan’s
Stewardship Code
October 2017
Partial revision to “Investment
Principles.”Stewardship activities including
ESG-oriented initiatives wereexpanded to all assets.

6 Stewardship Responsibilities

2019-20
November 2019
Partial revision to “Policy to Fulfill
Stewardship Responsibilities.”
Focused on prevention of activities
that impede long-term corporate
growth to achieve sustainable growthof the overall markets.
Contribute to sustainable growth ofmarkets.

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February 2020
Partial revisions to “Stewardship
Principles” and “Proxy Voting
Principles”
Requested compliance from managers
of all domestic and foreign assets.

① Revision of the Stewardship Principles and the Proxy Voting Principles
In June 2017, GPIF established the Stewardship Principles

their own, the said manager is required to explain to GPIF

and the Proxy Voting Principles. The objective of these

the rationale behind the non-compliance. In order to fulfill

two principles is, as a responsibility of a super long-term

our own stewardship responsibilities, GPIF appropriately

asset owner, to clarify the requirements and principles thatmonitors the stewardship activities of external asset

external asset managers should observe in conducting

managers, including the exercise of voting rights, andstewardship activities, including the exercising of voting

proactively conducts dialogue (engagement) with them. The

rights. GPIF requires external asset managers to comply

Stewardship Principles are comprised of the following fivewith these principles, and if an asset manager should decide

items.

not to comply with any of them due to circumstances of< 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
In February 2020, GPIF revised the Stewardship Principles forshall be made as a part of a constructive dialogue throughout

the first time to expand the scope of stewardship activities

the year.

to cover all asset classes, as it had been focused on equity

GPIF’s stewardship activities are founded on the Investment

investment, and newly call for a collaboration of stewardship

Principles, the Policy to Fulfill Stewardship Responsibilities,

division and investment division at asset managers, a

the abovementioned Stewardship Principles, and Proxy

constructive dialogue (engagement) with a wide range of

Voting Principles. We will continuously examine appropriate

stakeholders such as index providers, and active participation

stewardship responsibilities as a public pension fund andto various ESG initiatives. Meanwhile, the Proxy Voting

promote activities to fulfill our stewardship responsibilities.

Principles made a reminder that an exercise of voting rights

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Investment Results in Fiscal 2019

6 Stewardship Responsibilities② Participation in global initiatives
Starting with the signing up of PRI in September 2015,

we broaden our knowledge on ESG issues and utilize such

GPIF has been participating in multiple global initiatives as

expertise for evaluating the stewardship activities of externalfollows. Through joining the activities of these initiatives,

asset managers.

Joined in October 2018
A five-year initiative led by investors, established in
September 2017. Via dialogues with companies
that are significantly influential in formulating
possible solutions to global environmental issues,
it focuses on the improvement of climatechange-related governance, initiatives for the
reduction of greenhouse gas emissions, theenhancement of information disclosure, etc.
GPIF, as an asset owner, has also joined its Asia Advisory Group,
which provides the steering committee with advice on thecharacteristics of the Asian region.

Signed in September 2015
Six principles advocated in 2006 by Mr. Annan,
then Secretary General of the United Nations,which demand institutional investors to include
ESG in the investment process.
GPIF has joined the Asset Owner Advisory Committee, the SDGs
Advisory Committee, the Japan Network Advisory Committee, etc.
GPIF acquired A+, the highest score in Strategy and Governancemodule in 2019 assessment.

Joined the 30% Club in the UK, and the Thirty
Percent Coalition of the U.S. in November 2016.
Joined the 30% Club in Japan in December 2019.
Established to seek diversity in boards of directors, withthe aim of achieving 30% female directors.

Joined in August 2019
Supported in December 2018
Established by the FSB (Financial Stability Board) at
the request of the G20 Finance Ministers and Central
Bank Governors Meeting. In June 2017, the TCFD
published voluntary recommendations to encourage
information disclosure on the financial impact ofclimate-related risks and opportunities to enableappropriate investment decisions by investors.

Joined August 2019
Established by a U.S. public pension fund withthe aim of promoting shareholders’ rights andcorporate governance and collaborating in
the U.S.

An industry association established byinstitutional investors, focusing on
improvement of corporate governance andencouragement of stewardship activities
with the aim of promoting efficient markets
and sustainable economy.

[3] Promotion of ac tivities aimed at fulfilling stewardship responsibilities① Initiatives for the sustainable growth of the whole capital markets
A. Joint statement by asset owners
For a pension fund like GPIF, long-termism and sustainability

As a beneficiary of the market through participation in theof investee companies and the overall markets are critical ininvestment chain, and also as a pension fund responsibleorder to increase long-term investment returns. From thisfor future generations, we addressed this message to theperspective, GPIF has been promoting ESG activities. In thewhole market from the perspective of how asset owners

past several years, industry groups and asset managers havecan contribute to sustainability. The statement includes ourmade statements concerning “the significance of ESG” ascommitment to companies that create long-term corporate

well as “sustainability”. GPIF, as an asset owner, decided anew

value, and underlines the great significance of long-termismthat we must clarify our stance concerning long-termism

and ESG. As of March 2020, beside the initial threeand ESG, and jointly issued a statement, “Our Partnership for

signatories, a total of ten organizations from North America,

Sustainable Capital Markets,” with CalSTRS (U.S.) and USS

UK, continental Europe, Australia, and the Asian region have

Investment (UK), which share the same perspectives as GPIF

signed the statement (as of May 2020, the number of thethrough discussions at the Global Asset Owners’ Forum.

signatories increased to 14 institutions).

This statement summarizes the concept of how an asset
owner, like GPIF, shall fulfill its stewardship responsibilities.

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6 Stewardship Responsibilities

B. Suspension of stock lending
As part of our stewardship responsibilities, GPIF requires ourasset managers to enhance the long-term value of investee
companies by conscientiously exercising voting rights for all
the shares they hold, in addition to engaging in constructive
dialogues with investee companies (engagement) - notonly during the annual shareholder meeting season but
throughout the year. Meanwhile, we identified several
issues, such as an inconsistency between super long-term
perspective of GPIF and the concept of stock lending, or thefact that GPIF’s stock lending is conducted only for foreign
equities and not domestic equities. Stock lending results ina temporary transfer of ownership rights to the borrowers,

which effectively creates a gap in the period in which thestock is held by GPIF. It caused concern over inconsistency
with our stewardship responsibilities. Moreover, the current
stock lending scheme lacks transparency in terms of who
is the ultimate borrower and for what purpose they areborrowing the stock. In light of this situation, we havedecided to suspend stock lending after multiple discussions
at the Board of Governors. The stock lending scheme may
be reconsidered in the future if improvements are made toenhance transparency and address the inconsistencies cited
above.

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② Survey on compensation structure (incentive scheme) of GPIF asset managers
GPIF attaches importance to the alignment of interest withexternal asset managers. This survey of asset managers
for domestic and foreign bonds and domestic and foreign
equities, was conducted with the aim of examining thealignment between asset managers and GPIF from theviewpoint of compensation. Specifically, the survey focusedon the following two points: 1) whether the compensation
scheme for executives and employees at external 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) whether the incentive scheme
is designed for avoiding short-termism. In interviews
with individual asset managers, GPIF directly talked withexecutives of asset managers including CEOs, CIOs, anddirectors in charge of human resources about their approach,
Lagging

Degree of disclosure: Low (N=5)

While the Group aims to gradually establish
a system suitable to asset management,compensation has not been utilized as a
strategic measure yet.
Compensation is not positioned strategically.
Great importance tends to be attached to net sales,
growth rate of AUM and fees.
Bonus fund and individual bonus are decided in the same
system and levels to those of parent companies such as
banks, securities firms and insurance companies (evaluatedby setting goals and the degree of achievement)
The ratio of bonus to base salary (in some companies,
seniority is reflected rather than expertise) is low andthe gap from the performance is also small.
The bonus fund and the evaluation for investment
performance are not decided on a medium- tolong-term basis (single-year basis).
Payment and fixing of amounts are not decided on a
medium- to long-term basis, either.

Leading

Intermediate positioning (N=10)

Compensation is used strategically(N=20)

Similarly to “Leading,”
Being used strategically, the compensation
scheme has deferral of payment and fixingof amounts.
Meanwhile,
It does not fully reflect the investment
performance.

The compensation scheme is designed to reward
the contributions of teams and individuals as
follows: the KPIs and their weight are mechanicallycalculated to a certain degree based mainly on theinvestment performance, and environmental factors
are appropriately eliminated with discretions.

Intermediate positioning (N=2)

Domestic

Compensation is not positioned as a
strategy (N=7)

Average

The bonus for an individual is fixed based on theinvestment performance for the past five years or more, andthe ratio of variable compensation to fixed compensation
as well as the degree of such fluctuation is relatively high.
The compensation scheme also includes “Deferral of
payment” and investment in the funds of own company.
Similar characteristics to the “Leading”:
Compensation is used strategically.
The variable compensation ratio and therange of fluctuation are set appropriately.
The deferral system is applied to payment
and fixing of amounts.
Characteristics slightly different from the “Leading”:
The investment performance is not reflectedsufficiently.
The evaluation period for investment
performance is not long enough (three years
or shorter, etc.)
No system for investment in their own funds exists.

International

Specific way of thinking about
compensation (N=1)

policy and systems of compensation. We reaffirmed thatcompensation schemes are considered to indicate animportant engagement theme that reflects fundamental
principles of asset managers, such as their investment
philosophy and corporate culture.
GPIF has already entered into multi-year contracts withsome active managers, and considers that an appropriatecompensation scheme is one of the effective measures toensure alignment in seeking long-term oriented partnerships
with asset managers. Since the comprehensive assessment in
2019, GPIF has utilized the questionnaire on compensation
schemes for the survey for evaluation and selection of
external asset managers. The following diagram summarizes
the assessment by category based on a study commissioned
for Mercer Japan Ltd.

Compensation is used strategically.
The variable compensation ratio and the range offluctuation are set appropriately.
Great importance is attached to investment
performance.
Individual performance is evaluated by mechanicallycalculating to a certain degree, and appropriately
eliminating environmental factors.
The evaluation period for investment performance ismedium- to long-term (five years or longer).
The deferral system is applied to payment and fixingof amounts.
A system for investment in their own funds exists.

Prepared by GPIF based on “Research on compensation scheme (incentive structure) of executives and staff employees of external asset managers” for public release.

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6 Stewardship Responsibilities③ Other activities for enhancing investment chain
In order to build the investment chain so that the returnexchanged with asset owners from abroad. In the same year,

for pension beneficiaries can be increased over the long

GPIF also started conducting a survey of listed companies onterm, GPIF has held two forums since 2016: the Businessinstitutional investors’ stewardship activities for the purpose

and Asset Owners’ Forum and Global Asset Owners’ Forum.

of confirming how their stewardship activities including

In the former, opinions from companies can be collected

constructive dialogue (engagement) are being received byon a regular basis, whereby in the latter, opinions can beinvestee companies.

A. Business and Asset Owners’ ForumIn a questionnaire survey conducted with listed companies

At the Forum, participants discussed the recent dialogue

in January 2016, many companies requested meetings with

between companies and investors on their initiatives

asset owners. As a result, GPIF has been holding meetings

regarding TCFD and the revised Corporate Governance Codewith those companies on a regular basis. Furthermore,(mainly focused on long-term incentives, the compensation

several companies proposed the establishment of a regular

scheme that considers ESG measurements, and corporate

platform for the constructive exchange of opinions between

pension plans).GPIF continues to hold the Business andcompanies and GPIF, as an asset owner. In response, the first

Asset Owners’ Forum, as we believe the opportunity to

Business and Asset Owners’ Forum was held on September

listen to companies’ voices is very useful for GPIF to fulfill

1, 2016 by three co-organizers. The forum was held again in

our stewardship responsibilities. GPIF feeds back companies’

April 2019, with the participation of 10 companies in total,

opinions to asset managers and overseas asset owners as

including the three co-organizers.

well so that we can contribute to improve and optimize thewhole investment chain.

B. Conducting a Survey of Listed Companies regarding Institutional Investors’ stewardship activities<Objective of the survey>
As GPIF entrusts domestic equity investment of the pension

activities of asset managers. In 2019, GPIF conducted thereserves to external asset managers, it requests them tofifth survey, by sending questionnaires to the TSE-listed

enhance their stewardship activities. To ascertain how

2,160 companies* for the purpose of assessing stewardshipinvestee companies receive asset managers’ stewardship

activities and “constructive dialogue (engagement)” of asset

activities, including engagement, GPIF conducted the firstmanagers as well as understanding any changes during the“Sur vey of Listed Companies regarding Institutional

year since the previous survey. 662 companies responded

Investors’ Stewardship Activities” in 2016, of JPX Nikkei Index(accounting for 30.6%).

400 companies. The purpose of this sur vey to listed* The number of companies is as of December 30, 2019.

companies is to examine the validity of the stewardship

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Investment Results in Fiscal 2019

6 Stewardship Responsibilities<Summary of the results of the survey>
Of the survey respondents, 40 percent answered that there

also shown that companies have perceived positive changes

had been positive changes to the attitudes of institutional

in investors’ interest in and utilization of non-financial

investors at IR meetings, etc. over the past year. The results

information. Many companies expect GPIF to: (i) encourageof the questionnaire show that companies’ ESG awarenessour external asset managers to conduct investment andand initiatives, as well as information disclosure, areengagement from a long-term perspective; (ii) promote

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improving significantly, as indicated by the enhancement ofconstructive and essential dialogues; (iii) provide support for1

companies’ non-financial information disclosure including

the establishment of ESG; (iv) promote ESG investment and

ESG information, new disclosure initiatives such as TCFD,

direct and indirect stewardship activities that will involvethe high-level of recognition of SDGs, and climate change

small cap companies; and (v) encourage ESG evaluators tobeing listed as the most important theme of corporate ESG

improve their own governance.

activities followed by corporate governance. The results have

Response rate by company size

Respondents’ coverage
Inside: response rate based on
the number of companies
Outside: response rate basedon market cap

662
companies
31 %

34%

79.0

Large-cap

63.8

Medium-cap

Responded

19.8

Small-cap

No response

0

1,498companies
69%

20

40

60

80

66%

100
(%)

Institutional investors utilization of integrated reports
50.0This survey

46.3

39.4

Previous survey

52.9

17.5

The survey before last

0

3.7
7.7

73.9
20

40

They appear to use reports more
effectively than before
No significant changes
Do not appear to use reports
effectively

8.5
60

80

100
(%)

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6 Stewardship Responsibilities[4] Material ESG issues recognized by ex ternal asset managers
Material ESG issues recognized by external equity managers

governance was the most common theme of ESG activities

are as follows. GPIF found that all passive managers thatof Japanese companies. Taking TCFD recommendations,

keep holding investees’ stocks recognize “Climate Change”

which GPIF supports, for example, companies are requiredand “Disclosure” as material ESG issues and tend to regard

to disclose information on their recognition and analysis

long-term issues including “E” (environmental) and “S” (social)on, climate change-related risks and opportunities, as wellas particularly critical. Regarding active managers with aas strategies for this issue, and management framework

primary holding period of approximately several months to(governance) for its implementation. It shows that a common

a few years, different ESG issues were recognized as material

awareness has been formed among both investors anddepending on whether they are managers for domestic

companies that “G” (governance) is a necessary framework

equities or foreign equities. GPIF found that material issues

to ensure the resolution of long-term issues including “E”

recognized by active managers for domestic equities has(environmental) and “S” (social) such as climate change, andexpanded to include “E” (environmental) and “S” (social), in

to improve companies’ sustainable growth and corporate

addition to “G” (governance), but they see “Board Structure,value over the long term. GPIF’s Stewardship Principles

Self-evaluation” and other “G” (governance) issues as

require proactive engagement in material ESG issues tomore critical. In the survey of listed companies, corporate

external asset managers.

<Passive domestic equity><Active domestic equity>

Climate Change

100%

Board Structure, Self-evaluation 100%

<Passive foreign equity>

Disclosure

100%

Minority Shareholder Rights 100%

Diversity

100%

Diversity

88%

Misconduct

100%

Capital Efficiency

89%

Other (Social)

100%

Other (Social)

75%

Board Structure, Self-evaluation

86%

Disclosure

78%

Disclosure

100%

Disclosure

75%

Climate Change

100%<Active foreign equity>
Climate Change

100%

Minority Shareholder Rights

86%

Misconduct

78%

Corporate Governance75%

Corporate Governance75%

Capital Efficiency

86%

Supply Chain

78%

Supply Chain75%

Supply Chain75%

Supply Chain

86%

Environmental Opportunities

78%

Board Structure, Self-evaluation

75%

Board Structure, Self-evaluation75%

Corporate Governance86%

Labor Standards

67%

Water Stress, Water Security

75%

Human Rights & Community

75%

Diversity

86%

Climate Change

56%

Other (Governance)

75%

Labor Standards

75%

Human Rights & Community

86%

Corporate Governance

56%

Environmental Opportunities

63%

Environmental Opportunities

71%

Diversity

56%

Health and Safety

63%

Other (Social)

71%

Human Rights and Community

56%

Anti-Corruption

71%

Waste Management

56%

Waste Management

57%

Pollution & Resources

56%

Other (ESG)57%

Social Opportunities

56%

Other (Governance)

57%

Product Liability

56%

Health and Safety

57%■■…S (Social)

Water Stress, Water Security

57%■■…G (Governance)

Biodiversity

57%■■…Duplicated ESG themes

Deforestation

57%■■…E (Environmental)(Note 1) A survey on external asset managers for equities was conducted in December 2019
(Note 2) The ratios in the list above were obtained by dividing the number of external asset managers that selected the relevant issue as numerator by the number ofexternal asset managers of each mandate (passive/active, domestic/foreign) as denominator.
(Note 3) “Material ESG issues” as pointed by more than 50% of the respondents are listed above. Items in red are issues pointed out by all of the respondents. When an
asset manager is entrusted to both active and passive mandates, its answer is counted as the one with larger amount of mandate by GPIF.

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6 Stewardship Responsibilities[5] Exercise of voting rights① Concept of exercise of voting rights
The Medium–term Objectives established by the Minister ofsocial and governance) materiality that leads to long-term

Health, Labour and Welfare stipulate that GPIF “should takeinvestment returns. When doing so, GPIF shall clarify thatappropriate measures including exercise of voting rights

stewardship activities including the exercise of voting rights

while giving due consideration to influence on corporate

by our external asset managers aim to improve long-term

management.” In this regard, GPIF in its Medium–term Plan

investment returns solely for the pension beneficiaries.”

states, “GPIF itself does not exercise voting rights and instead

External asset managers submit the guideline for voting andentrusts the external asset managers with the exercise ofannually report voting results to GPIF. GPIF holds meetings

voting rights so as to avoid giving a direct influence onwith the managers on the results, and evaluates the way

corporate management. However, from the viewpoint ofin which a manager exercises voting rights in the annual

further promoting its stewardship activities, GPIF shallassessment meeting, considering their exercise as an item ofconduct efficient engagement when entrusting an external

initiatives for fulfilling stewardship activities.

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asset manager, with an awareness of ESG (environmental,② Exercise of voting rights in fiscal 2019
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 2019. 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
The status of exercise of voting rights by external asset managers for domestic equities (from April 2019 to March 2020)
Number of external asset managers who exercised voting rights: 32 funds
Number of external asset managers who did not exercise voting rights: none
Proposals pertaining to director
remuneration, etc.

Proposals pertaining to company organization
Proposal

Shareholder proposals

Management
proposals

Number of voting
rights exercised

Total
Approved
Opposed
Total
Approved
Opposed

Appointment
of directors

External
directors

Appointmentof auditors

External
auditors

Appointment
Directorof accounting
remuneration
auditors

Director
bonuses

Director
retirement
benefits

Grantingof stock
options(Unit: No. of proposals, percentage)

Proposals pertaining to capital management Proposals
Poison Pills(excluding items pertaining to amendment
pertaining to(Rights plan)of the articles of incorporation)
Other
Acquisition Mergers, amendment ofproposals
Warning
Trust–typeDividends of treasury acquisition, the articles oftype
incorporation
etc.
stock

Total

190,586

60,19828,42419,082

489

6,225

1,732

1,448

1,003

15,986

82

667

6,262

877

9

235

189,943

59,93928,377

19,046

489

6,168

1,732

1,448

1,003

15,914

20

667

5,047

877

9

221

254,025
251,915(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%)(100.0%)(100.0%)170,00252,28323,963

14,760

487

5,701

1,451

316

788

15,424

20

655

4,903

140

0

208

224,058(89.5%)(87.2%)(84.4%)(77.5%)(99.6%)(92.4%)(83.8%)(21.8%)(78.6%)(96.9%)(100.0%)(98.2%)(97.1%)(16.0%)(0.0%)(94.1%)(88.9%)

19,941

7,656

4,414

4,286

2

467

281

1,132

215

490

0

12

144

737

9

13

27,857(10.5%)(12.8%)(15.6%)(22.5%)(0.4%)(7.6%)(16.2%)(78.2%)(21.4%)(3.1%)(0.0%)(1.8%)(2.9%)(84.0%)(100.0%)(5.9%)(11.1%)

643

259

47

36

0

57

0

0

0

72

62

0

1,215

0

0

14

2,110

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

161

78

12

12

0

3

0

0

0

29

14

0

102

0

0

10

331

(25.0%)(30.1%)(25.5%)(33.3%)(0.0%)(5.3%)(0.0%)(0.0%)(0.0%)(40.3%)(22.6%)(0.0%)(8.4%)(0.0%)(0.0%)(71.4%)(15.7%)

482

181

35

24

0

54

0

0

0

43

48

0

1,113

0

0

4

1,779

(75.0%)(69.9%)(74.5%)(66.7%)(0.0%)(94.7%)(0.0%)(0.0%)(0.0%)(59.7%)(77.4%)(0.0%)(91.6%)(0.0%)(0.0%)(28.6%)(84.3%)(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 four abstentions.

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6 Stewardship Responsibilities

The status of exercise of voting rights by external asset managers for foreign equities (from April 2019 to March 2020)
Number of external asset managers who exercised voting rights: 19 funds
Number of external asset managers who did not exercise voting rights: none

Proposal

Shareholder proposals

Management
proposals

Number of voting
rights exercised

Total
Approved
Opposed
Total
Approved
Opposed

Proposals pertaining to company
organization

Appointment
Appointment of Appointment of
Directorof accounting
directors
auditors
remuneration
auditors

Director
bonuses(Unit: No. of proposals, percentage)

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

Proposals pertaining to director
remuneration, etc.
Director
retirement
benefits

Granting ofstock
options

Dividends

Mergers,
Acquisition of
acquisition,
treasury stock
etc.

Total

statement, etc.

90,464

4,522

10,591

18,444

181

359

4,120

7,982

4,142

9,561

6,996

248

10,43633,316

89,106

4,090

10,521

17,984

180

358

4,057

7,963

4,142

9,437

6,463

236

10,43629,823

194,796(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%)201,362

77,863

3,592

10,064

15,426

155

310

3,024

7,822

3,933

7,414

5,799

181

9,983

24,799170,365(87.4%)(87.8%)(95.7%)(85.8%)(86.1%)(86.6%)(74.5%)(98.2%)(95.0%)(78.6%)(89.7%)(76.7%)(95.7%)(83.2%)(87.5%)

11,243

498

457

2,558

25

48

1,033

141

209

2,023

664

55

453

5,024

24,431(12.6%)(12.2%)(4.3%)(14.2%)(13.9%)(13.4%)(25.5%)(1.8%)(5.0%)(21.4%)(10.3%)(23.3%)(4.3%)(16.8%)(12.5%)

1,358

432

70

460

1

1

63

19

0

124

533

12

0

3,493

6,566

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

965

379

65

164

1

0

40

13

0

86

208

12

0

1,582

3,515

(71.1%)(87.7%)(92.9%)(35.7%)(100.0%)(0.0%)(63.5%)(68.4%)(0.0%)(69.4%)(39.0%)(100.0%)(0.0%)(45.3%)(53.5%)

393

53

5

296

0

1

23

6

0

38

325

0

0

1,911

3,051

(28.9%)(12.3%)(7.1%)(64.3%)(0.0%)(100.0%)(36.5%)(31.6%)(0.0%)(30.6%)(61.0%)(0.0%)(0.0%)(54.7%)(46.5%)(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 1,836 abstentions.

57

Proposals Poison Pills
Other proposals
pertaining toforamendment ofApprovalof
warningOther
the articles offinancial
type
proposals
incorporation

Investment Results in Fiscal 20197 ESG Activities

7 ESG Activities[1] Basic approach

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Universal owner• GPIF is an investor with a very large fund size and a widely diversified 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 negativewith a well-diversified portfolio that largely represents theexternalities such as environmental and social issues, andworld’s capital market. GPIF is a typical “universal owner”

to improve the sustainable return from the whole assets, aswith a broadly diversified portfolio comprised of equities and

GPIF is a “Universal owner” and “Cross-generational investor.”

bonds of the majorities of Japanese listed companies and“Universal owner” is a term often used in relation to pension

major foreign companies.

management and ESG investment, referring to an investor

The number of securities owned by GPIF (as of the end of March 2020)
3,000
2,500

(The number of securities)

2,389

2,724

2,722

2,164

2,000
1,500
1,000
500
0

TOPIX

Domestic equities
owned by GPIFMSCI ACWI
Foreign equities(excluding Japan) owned by GPIF

For instance, if the share prices of some portfolio companies

it is that they will materialize. Therefore, we consider that

increase as a result of conducting business activities without

it has great benefits for GPIF to integrate ESG factors into

paying attention to their large impacts on the environment

its investment process as a cross-generational investorand society for the sake of short-term revenue expansion,

responsible for supporting pension finance designed

and society and the economy as a whole, including otherwith time horizon of as long as 100 years. That is to say,companies, are negatively affected by such activities, theconducting ESG activities in order to reduce negative

overall portfolio of a universal owner will be significantly

externalities such as environmental and social issues, andimpaired. In other words, the sustainability of the capital

to improve the sustainable return from the whole assets

market and society is a prerequisite for the sustainability

is consistent with the objective of the Employees’ Pensionof universal owners’ portfolios. The “universal ownership,”Insurance Act and the National Pension Act to “manage

the concept that universal owners conduct ESG activities

pension reserves safely and efficiently from a long-term

proac tively to control and minimize such negative

perspective solely for the pension beneficiaries,” and GPIF

externalities—lies at the core of GPIF’s ESG investment. In

continues promoting ESG activities proactively.

addition, the longer the ESG risks persist, the more likely
58

Investment Results in Fiscal 20197 ESG Activities

GPIF conducts ESG activities not only for equities but also for

securing long-term investment returns for the interest ofother asset classes, including bonds and alternative assets.

pension beneficiaries (applicable from April 2020).

GPIF shall manage pension reserves in line with the basic

Evaluation of ESG promotion activities requires the following

policy that is meant to ensure that the reserves are managed

perspectives: 1) it takes a long period of time for the effects

and invested safely and efficiently from a long-termof ESG investment to materialize; and 2) ESG investment isperspective (hereinafter referred to as the “Basic Policy ofalso aimed at improving the sustainability of the entire

Reserves”) announced in accordance with the Employees’

capital market. These perspectives are different from general

Pension Insurance Act.

investment evaluation of how much investment returns are

The Basic Policy of Reserves was revised in February 2020,

generated over a certain period. In order to evaluate thesestipulating that the sustainability of investee companies and

ESG initiatives to confirm the effect of investment while

the overall markets will be critical for the improvement of

ensuring the transparency, GPIF has published the ESG

long-term investment returns in the management ofReport since 2018. In 2019, we published ESG Report 2018,

pension reserves. It also stipulates that the reserve funds

the second issue, which includes a disclosure in line with theshall implement the necessary initiatives by individually

declaration of the Task Force on Climate-related Financial

examining the promotion of investments that consider ESG

Disclosures ( TCFD), for which GPIF has expressed our(environmental, social and governance) as non-financial

support in 2018. GPIF will continue verifying the effect of its

factors in addition to financial factors, from the viewpoint of

ESG initiatives to improve its ESG-related activities.

Expansion of
ESG investment(Investment opportunity
at low cost)

Improving thesoundness of pension
finance

Building
sustainable
society

Improvement ofrisk-adjusted returns

59

Increasing
incentives to enhance theresponse to ESG
by companies

Improvement of the
ESG evaluation ofcompanies

Investment Results in Fiscal 20197 ESG Activities[2] Passive investment based on ESG indicesIn 2017, GPIF selected two integrated indices and one

collecting information related to the following three areas

thematic index focused on gender diversity for Japanese

during the pilot phase:

equities, and commenced passive investment tracking those(Note) For details of Index Posting System, refer to page 66.

indices. The selection criteria for the ESG indices included① Foreign equity ESG index (e.g. indices that select/weight

economic rationality based on the risk-return profile of eachconstituents according to overall ESG metrics )index and the possibility of these indices to boost the equity② Foreign equity diversity index (e.g. indices that select/market in Japan through improvement of ESG evaluation.

weight constituents according to women’s advancement

In 2018, with climate change increasingly becoming serious,or other diversity factors )GPIF selected the S&P/JPX Carbon Efficient Index for③ Environmental bond index

Japanese equities and the S&P Global Ex-Japan Large(a) Green bond index

Midcap Carbon Efficient Index for foreign equities. These are(b) B ond indices that select/weight constituentsstock indices designed to measure the carbon efficiency of

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according to environmental factors, etc.

companies (greenhouse gas emissions divided by revenues)(c) O ther environmental bond indices (e.g. hybrid

in the indices and GPIF commenced passive investment

indices that include (a) and (b))

tracking those indices.

We expect that these selected ESG indices will provide an

Moreover, in 2019, GPIF announced the launch of the “Index

incentive for companies to enhance their responses to

Posting System” (IPS) - a new framework for collecting index

ESG issues and lead to the improvement of theirinformation on a continuous basis - in order to efficiently

corporate value in the long term.

gather various index information for the purpose ofenhancing our overall fund management. IPS has started

List of selected ESG indices
Thematic indices

Integrated indices

FTSE Blossom

E( Environmental )Japan Index

S&P/JPX
Carbon Efficient IndexSeriesS( Social )MSCI JapanESG SelectLeaders Index

G

MSCI Japan Empowering
Women Index (WIN)( Governance )60

Investment Results in Fiscal 2019

Index
concept

7 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 trackrecords globally for ESG indices.

· The MSCI Japan ESG Select Leaders
Index is a broad ESG index that
integrates various ESG risks into
today’s portfolio. The index isbased on MSCI ESG Research thatm o re t h a n 1 , 0 0 0 c l i e nt s u s e
globally.

· M SCI calculates the genderdiversity scores based on various
pieces of information disclosed
under “the Act on Promotion of
Wo m e n’s P a r t i c i p a t i o n a n d
Advancement in the Workplace”
a n d s e l e c t s co m p a n i e s w i t hhigher gender diversity scoresfrom each sector.

· The index is a broad ESG index
that selects stocks with highabsolute ESG scores and adjusts
industry weights to neutral.

· The index incorporates stocks withrelatively high ESG scores in eachindustry.

· The 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(509 stocks)

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

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

Number of index
constituents

181

248

305

Assets undermanagement¥931.4 billion¥1,306.1 billion¥797.8 billion

S&P/JPX
Carbon Efficient Index

S&P Global
Ex-Japan LargeMidCap
Carbon Efficient Index

Index
concept• Based 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
which have low Carbon to Revenue Footprints (annual greenhouse gas(GHG) emissions divided by annual revenues) and actively disclose
information of carbon emissions.

Subject ofinvestment

Domestic equity

Foreign equity

Constituent
universe(parent index)

TOPIX(2,164 stocks)

S&P Global ex-Japan
LargeMidCap Index(2,896 stocks)

Number of index
constituents

1,725

2,037

Assets undermanagement¥980.2 billion¥1,710.6 billion(Note) Number of index constituents and assets under management are as of March 31, 2020.

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

61evaluation and how they construc t 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.

Investment Results in Fiscal 20197 ESG Activities

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

Japan

60

24

Germany

UK
Switzerland

Canada

46

34
0

20

60

42

26

40

1
76

62
65

53

41

U.S.

66

49

39

Australia

66
69

47

38

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70

47

31

78
76

63

51

France

79
78

57

2019
2018
2017
2016

65
66

60

80

100
(%)

Reproduced by permission of MSCI ESG Research LLC ©2020. All rights reserved. No further reproduction or dissemination is permitted.
(Note) Universe is MSCI ACWI constituent companies. The above graph extracts major countries with 40 or more MSCI ACWI constituent companies.

[3] ESG integration in fixed income investment
GPIF has established an investment platform which provides
asset managers with an opportunity to invest in green,social and sustainability bonds issued by multilateraldevelopment banks including the World Bank Group andgovernment finance agencies of individual countries, which
provide external asset managers with an opportunity for ESG
integration in fixed income investment and obtaining excess
returns against government bonds. Behind this, (i) demand
for green bonds often exceeds supply in the primary market,
and it is difficult to purchase them in the secondary market
because many of the investors tend to hold them until
maturity; and (ii) GPIF has sought a way to secure investment
returns because it holds bonds worth about ¥74 trillion as ofthe end of March 2020, most of which are government bonds
issued by developed countries including Japan and Europe
where government bonds with negative yield have become
more common. This initiative started with entering into a
partnership with the International Bank for Reconstruction
and Development (IBRD) and the International FinanceCorporation (IFC) in April 2019, both members of the WorldBank Group, and then expanded to the European Investment

Bank (EIB), the Asian Development Bank (ADB), the Nordic
Investment Bank (NIB), the African Development Bank (AfDB),
the European Bank for Reconstruction and Development(EBRD), the Islamic Development Bank (IsDB), the Councilof Europe Development Bank (CEB), and the Inter-American
Development Bank (IDB). In addition to this, GPIF alsoestablished partnerships with government finance agencies,
Kreditanstalt für Wiederaufbau (KfW), Kommuninvest, and
BNG Bank. GPIF established investment platforms with ten
multilateral development banks and three government
finance agencies as of the end of March 2020. The investment
in green, social and sustainability bonds through theseplatforms reached ¥441.4 billion as of the end of March 2020
(calculated by GPIF based on Bloomberg data for bonds
in compliance with principles, etc. of International CapitalMarket Association (ICMA).)
GPIF promotes ESG integration not only in equity investment
but also fixed income and other asset classes in orderto reduce the negative impacts of environmental andsocial issues and improve long-term returns on its entire
investment assets.

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Investment Results in Fiscal 2019

8 Other Major Initiatives

8 Other Major Initiatives[1] Call for applications from ex ternal 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 status of registration of external asset managers as ofthe end of fiscal 2019 is as listed in the right table.

The number of
information
provided

Asset class

The number of
entries

Domestic bonds

13

0

Domestic equities

57

12

System to all four traditional asset classes in February 2018.

Foreign bonds

178

34

Foreign equities

541

142

B. Selection for passive and active managers of foreign bonds
GPIF selected two MBS-TBA passive funds for foreign

the existing external asset managers in February 2018, forbonds. As for foreign bonds active investment, GPIF called

which the third screening process was completed in fiscal

for applications for active managers for high-yield bonds

2019, and we newly selected four active funds and reselected

through the Asset Manager Registration System to review

two existing active funds.

C. Screening process for active managers of domestic equities and foreign equities
In order to achieve a stable excess rate of return, GPIF

of active managers who pursue multi-manager investment

screened active value managers for domestic equities tostrategies for foreign equities, and carried out the third

review the existing external asset managers, and completed

screening process.

the second screening process. It also conducted a screening
D. Call for applications for managers of alternative assets
GPIF has been calling for applications for asset managers

real asset mandate and three external asset managers for

who will implement multi-manager investment strategies

an infrastructure mandate in fiscal 2017, GPIF selected one

for alternative assets (infrastructure, private equity, andexternal asset manager for a foreign real estate mandate inreal estate) since April 2017, with the aim of improving

fiscal 2018, one external asset manager for a global private

efficiency through investment diversification. Following

equity mandate in fiscal 2019, and we have started investing

the selection of one external asset manager for a domesticin those assets.

Flexibly adopt new
asset managers

GPI F
Data Entry

63

Assessment

New Manager

New Manager

New Manager
New Manager

Screening with utilizing
advice given by external advisor

Evaluation

Data Management

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

Competition

Investment Results in Fiscal 2019

8 Other Major Initiatives② Revision of the selection process and screening criteria for external asset managers
A. In order to conduct the selection more flexibly, GPIF shall

B. In accordance with Stewardship Principles with a provision

clarify the necessary profiles and investment capabilities

of “ESG Integration into Investment Process” requestingof products and managers prior to starting a selection

ESG integration to external asset managers, GPIF shallprocess, and go on to the second screening processassess if they include ESG issues in investment analysis

focused on the availability of these attributes, to narrowand investment decisions explicitly and systematically on

down candidates for more detailed screening in the third“Investment process”, which is one of assessment criteria.

screening process. We used to finalize comprehensive

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assessment and adoption simultaneously, but has started
to finalize only an assessment in the third screening
process, and then make a final decision by taking into
account the composition of external asset managers, sothat we could improve the consistency of assessment.

Selection Process for Asset Managers
Calling for applications through the Asset Manager Registration System

Decision on selection criteria●

Investment Committee decides on the profiles and investment capabilities
required for products and managers.

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 theAssert Management Registration System, asset managers subject to thesecond screening will be selected.
• Requirements for public invitation, such as approval under relevant laws and regulations• Investment performance, etc.

Second screening●

Based on carefully examined documents submitted by asset managers andinformation from an external database, as well as the results of interviews, if
necessary, and screening to check if the profiles and investment capabilities
meet the requirements, asset managers subject to the third screening will beselected.

● Investment process(including ESG integration)● Organization and human resources● Internal control● Stewardship activities(for equities and alternative assets)● Administrative operation system● Information security measures● Information provision, etc.
● Investment management fees

Third screening●

Interview will be conducted at the applicants’ office to assess their investment
system, capabilities, and the adequacy of their investment management fees
to finalize the comprehensive score.

Assignment of asset manager
Based on the composition of external asset managers from the perspective of
appropriate investment size and diversification of risk styles, asset managers
will be assigned.
● The results of selection will be reported to the Board of Governors.
●

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Investment Results in Fiscal 2019

8 Other Major Initiatives③ Outline 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)④ 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 receive
further explanations in regular meetings and other activities.
In fiscal 2019, GPIF held a meeting to identify a fund ofparticular investment concern and decided to cancel one
domestic equity active fund, and deliver a warning to threedomestic equity active funds, two domestic equity passive
funds, and one foreign equity passive fund accordingly.
In addition, in accordance with a replacement of a key
person in a foreign bond active manager, GPIF decided tocancel one foreign bond active fund based on the continuityof investment.
As for passive investment of domestic equity and foreign
equity, in order to improve the long-term investment returns
65of the overall investment assets, GPIF transferred the assetsof existing market value-type domestic equity passive
investment and foreign equity passive investment to ESG
passive investment of domestic equity and foreign equity,
respectively. As for foreign bond active investment, GPIF
conducted the third screening process of active managers
for high-yield bonds for which GPIF had called for
applications in fiscal 2018, and newly selected four active
funds and reselected two active funds of foreign bonds. In
addition, we selected two MBS-TBA passive funds for foreign
bonds.
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.

Investment Results in Fiscal 2019

8 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. GPIF has shifted to a comprehensive assessment
method which makes it possible to take each manager’s
strengths and weaknesses into consideration, as we haveadopted multiple custodians and we are expected to have awider range of choices of custodians in the future. The resultsof this comprehensive assessment showed that there wereno particular problems identified with any custodian, which
led us to conclude that it would be appropriate to continue
the existing contracts with them.

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C. Reviewing our approach to custodians
GPIF previously adopted approach of selecting one
custodian for each asset class to entrust administrative
operations. However, it is widely known that such approach
involves the risk of interfering with the diversification of
investment management and concerns over the business
continuity plan (BCP). Accordingly, GPIF is reviewing ourapproach to asset management to enable the adoption ofmultiple 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 engagement with external asset managers.
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 fiscal 2019, we adopted multiple custodians for managing
short-term assets.

(Note) For the list of external asset managers, etc., refer to page 82-83.

[2] I ntroduc tion of I ndex Posting System
As passive investments account for the vast majority of GPIF’s
portfolio, the benchmarks that we select heavily influence
our fund performance. Meanwhile, the demand for a wide
variety of new types of indices has dramatically increased, as
in recent years GPIF has managed money based on smartbeta, ESG, and other diverse themes.
With this in mind, GPIF launched the provisional versionof the “Index Posting System” (IPS) - a new framework forcollecting index information on a continuous basis - infiscal 2019 in order to efficiently gather the latest index
information for the purpose of enhancing our overall
fund management. GPIF has also started establishing an

infrastructure called Index Data Entry and Analysis System(IDEAS) where information of posted indices is accumulated
efficiently, and integrated with financial and non-financial
information including ESG-related information for analysis
purposes. IPS has started collecting index information on aforeign equity ESG index, foreign equity diversity index, andenvironmental bond index during the pilot phase.
Since the official launch of the full version of the IPS in fiscal
2020, we have been accepting information on market-cap,
smart beta, ESG, or any other indexes for equity and fixedincome on a continuous basis.

〈Diagram of IDEAS (infrastructure for utilizing index and other data〉

Service Development/Provision
Data provision

Analysis tool

Data distribution

Index companies

Verification andanalysis
Index
proposal(Note) Logos used in the diagram are the name of service providers and their services which are actually being used within IDEAS.

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Investment Results in Fiscal 2019

8 Other Major Initiatives[3] Promoting research and study① GPIF Finance Awards
Today, investment techniques are becoming increasingly
sophisticated and financial products are growing theirdiversities. In light of this, GPIF believes it is essential tofoster an environment that encourages academic research ininvestment fields, so that the pension reserves are invested
safely and efficiently.
In 2019, the ceremony for the third GPIF Finance Awards washeld. The Minister of Health, Labour and Welfare; the Ministerof Education, Culture, Sports, Science and Technology; andParliamentary Vice-Minister of Cabinet Office attended the
ceremony as guests. The award winner was determined
as follows, after going through a screening process by theselection 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:
Prof. YOGO Motohiro at Princeton University
Profile: 	He graduated from Princeton University. Ph.D. in economics from Harvard University. After
working at the Federal Reserve Bank of Minneapolis and Wharton School of University ofPennsylvania, he assumed his present post in 2015.
Rationale: 	For the outstanding work in a wide range of study areas including finance, insurance andeconometrics, especially in asset pricing theory and the scheme and role of an investmentcompany and an insurance company, and the further contributions expected in the future.

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
David Chambers	Professor, Cambridge Judge Business School, University of Cambridge
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)
Yuri Okina	Chairwoman, Japan Research Institute (member of the Financial System Council)
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)

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Investment Results in Fiscal 2019

8 Other Major Initiatives② Promoting joint research and study
GPIF considers that it is necessary to conduct researchreserves safely and efficiently. In fiscal 2019, we carried out

studies and joint research projects with universities, andthe following seven research studies and joint researchaccumulate knowledge acquired through such research

projects.

activities in order to continue investments of pension
A. Research on the use of artificial intelligence (AI) to study trading behaviors of fund managers
Purpose of research: In “A study on the Use of Artificial

study was fur ther developed to attempt to quantify

Intelligence within Government Pension Investment Fund’s

information which is difficult to assess quantitatively, such as

Investment Management Practices,” since fiscal 2017, theuniqueness or habits, in order to capture the consistency of

trading data of GPIF’s active managers for domestic equities

investment behaviors taken by an active asset manager inand foreign equities was analyzed, using machine learning,

the past and recent times.

and showed the possibility of classifying investment styles

Commissioned to: Sony Computer Science Laboratories, Inc.

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into patterns and identifying style drifting. In fiscal 2019, theB. Research and study on private debt
Purpose of research: GPIF intends to diversify our investment

investments by examining whether private debt (private

targets for the interests of the pension beneficiaries. Its past

placements, bank loans, direct lending, real estate non-initiatives include an investment in alternative assets having

recourse loans, infrastructure debt, etc.) can become another

different risk-return profiles from traditional assets. The

target of investment.

study was conducted for the purpose of diversifying

Commissioned to: SAPIAT

C. Research that contributes to the formulation of the fourth Medium-term Plan
Purpose of research: GPIF is to formulate our own fourthcollected information regarding long-term changes in GPIF’s

Medium-term Plan for five years from fiscal 2020 in line withex ter nal environments and infor mation needed to

the fourth Medium-term Objectives stipulated by thesophisticate the investments, etc., and also conducted theMinister of Health, Labour and Welfare. It is important for

research on the long-term roles and challenges of GPIF. We

GPIF to formulate the fourth Medium-term Plan from a long-utilized the results of this research for formulating the fourthterm perspec tive because GPIF aims to “ensure theMedium-term Plan with ensuring the further improvements

achievement of investment return required for the pension

in quality.

finance from a long-term perspective solely for the pension

Commissioned to: Mizuho Research Institutebeneficiaries with minimal risks”. For this purpose, the study
D. Research regarding a method to duplicate the performance of alternative assets
Purpose of research: Since alternative assets tend to haveand listed assets; and (iii) a method to evaluate investment

lower liquidity and higher fees compared to traditional

fees and performance, in order to organize matters to beassets, GPIF understands that it must ensure sufficient

resolved upon the adoption of the abovementioned

liquidity to pay pension benefits and evaluate investment

duplication method and assessment method. This researchfees and performance appropriately.

intends to utilize the collected information and the research

For this purpose, GPIF needs to collect information

result as a basis of alternative asset investments for further

regarding (i) basic matters of performance data and indicesimproving their quality.

of alternative assets; (ii) a method to duplicate theCommissioned to: Nomura Research Instituteperformance of alternative assets using traditional assets

68Investment Results in Fiscal 2019

8 Other Major Initiatives

E. Joint research of risk management indicators for a flexible investment
Purpose of research: For adopting a flexible asset allocationsuggesting the current risk status, such as traditional

strategy, it is necessary to sophisticate the analysis oftracking errors and VaR, but a forward-looking leading

economic and market conditions that have been becoming

indicator, based on cutting-edge theoretical studies

highly volatile in recent days. GPIF has started research (joint

including novel approaches and studies that transcend

research) on new risk management indicators in order toexisting frameworks.

diversify risk managements for a flexible execution of

Jointly research entity: Waseda University

investments. This research aims to develop not an indicator
F. Joint research on diversification effects and portfolio efficiency obtained through ESG investment
Purpose of research: GPIF, as a universal owner and a cross-Specifically, it requires a chronological analysis method or a

generational investor, promotes the integration of ESG into

country-specific comparative analysis method based on ao u r i nve s t m e n t s fo r re d u c i n g n e g a t i ve e f fe c t s o nquantitative analysis taking historical changes and aenvironmental and social issues and improving long-term

difference between countries into account. This study

investment returns of the overall portfolio asset. In pursuing

especially utilizes a sophisticated method using a regime

these initiatives, examination of diversification effects andswitching model, etc. aiming to obtain an advanced andportfolio efficiency obtained through ESG investments

unique outcome through the detection of regime variances

allows for more appropriate and efficient ESG initiatives,and condition analysis.

while the effectiveness must be assessed from an objective

Jointly research entity: Crawford School of Public Policy,

point of view.

Australian National University

G. Joint research towards the realization of “Society 5.0 for SDGs”
Purpose of research: We are experiencing an age of an

returns of portfolio assets of reserve fund, this study wasevolution of digital transformation (DX), a change in an

conducted by Japan Business Federation, University of

economic and social structure, heightening fears of global

Tokyo, and GPIF, three parties representing Japan’s businessenvironmental issues, and a shift in people’s mindset, etc., toworld, academia and investors, respectively.

which our conventional concept is no longer applicable. In

The study suggests that in Japan a corporate activity whichthese circumstances, Japan has been attempting to realize

is conducive to Society 5.0 for SDGs would contribute to the“Society 5.0 for SDGs” in order to establish a sustainable

environmental and social sustainability and sustainable

society with a medium to long-term economic growth.

economic growth quantitatively and qualitatively from the

Meanwhile, studies and the implementation of Society 5.0, astandpoint of corporations, investors and academia.

novel idea proposed by Japan’s business industry, and of its

Based on the study result, GPIF will advance therelationship with ESG investments advocated by the Unitedimplementation of action plans.

Nations have just started. Based on a consensus that a

Jointly research entity: Japan Business Federation andsustainable growth of investee companies and the overall

University of Tokyo

markets is essential for increasing long-term investment

69

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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
elderly generations, instead of the advance funding method
whereby funds required to cover pension benefits areaccumulated in advance.
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, to respond to changes in the
population and economy appropriately, and to prepare forfurther decreasing birthrate and aging population expectedin the future, GPIF still holds certain amount of reserve funds
in the public pension scheme, while being managed undera pay-as-you-go system. It is stipulated that “the portion ofpension premiums not allocated to benefits will be invested
as reserve fund to stabilize pension finance.”
Japan’s decreasing birthrate and aging population areprogressing faster than in any other country. Under thepension system revision implemented in 2004 (hereinafter
the “revision of 2004”), the pension premium level willremain fixed into the future and the finite period offinancial equilibrium is set to be approximately 100 years,
covering the period until the current population would
finish receiving the pension premium. This measure 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. Through these measures, thesustainability of the public pension system is designed to be
improved. (see Note)
There are three laws relevant to investment of pension
reserve: the Employees’ Pension Insurance Act; the National
Pension Act; and the Act on the Government Pension
Investment Fund as an Incorporated Administrative Agency(hereinafter the “Act on the Government Pension Investment
Fund”) . These laws provide that “the pension reserve shall be
managed safely and efficiently from a long-term perspective
solely for the pension beneficiaries” (Employees’ Pension
Insurance Act and National Pension Act) and “the pension
reserve shall be managed safely and efficiently” (Act on the
Government Pension Investment Fund). Accordingly, themost fundamental legal requirement for management of thepension reserve is “safe and efficient management of pension
reserve from a long-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 fundless the nominal wage growth rate) of 1.7% with minimalrisks based on the current status and outlook for pension
finance.” In light of these requirements, GPIF, in its Mediumterm Plan, established the asset allocation (policy asset mix)
from a long-term perspective, on the premise of portfolio
diversification, and carries out investment and managementof 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 financein about 100 years, as mentioned above, a fiscal plan isdrawn up to use the pension reserve. Under this plan,
investment returns on the reserve fund should be paid as apart of pension 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 is expected to maintain a reserve fund equivalent to one
year of pension benefits. About 90 percent of the financial
source of pension benefits (the average of approximately 100
years based on the assumption of financial verification) is
71

funded by pension premiums and government contributions
for the year, while the financial source obtained from thepension reserve (reimbursement of trust money or payment
to national treasury) accounts for about 10 percent. The
reserve fund may not be reduced for about the next 50 years
or so. Moreover, GPIF owns a sufficient reserve fundnecessar y for the payment of pension benefits, andtherefore short-term market fluctuations associated with theinvestment of pension reserve do not affect payments forbeneficiaries. In other words, an unrealized gain or loss in a
specific year may not be reflected in the amount of pension
benefits in the following year.

Japan adopts a system where working generations
support the lives of the elderly generations.

Financial verification results(projections for pension reserves over approximately 100 years)[Trends of pension reserves under each scenario][Scenario I]
Peak: FY2095 (¥1,008 trillion)

Pension benefits
Current
recipient
generation[Scenario II]
Peak: FY2088 (¥693 trillion)

Pension premiums[Scenario III] Peak: FY2079

Current
working
generation

Contributions

Pension benefits¥479 trillion[Scenario III]

Actual as of March 31, 2020

Pension premiums
Futureworking
generation

Contributions¥151 trillion[Scenario IV]
Peak: FY2074 (¥300 trillion)

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[Scenario V]
Peak: FY2046 (¥234 trillion)22020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 2105 2110

(FY)

(Note 1) Population assumes medium fertility and medium mortality.
(Note 2) Asset size as of March 31, 2020 is only for the pension reserve fundand does not include Pension Special Account.
(Note 3) For details of Scenario I through Scenario V, refer to page 44.

[2] Regulatory requirements for pension reserve management and outline of Medium-term Objectives and Medium-term Plans① Basic Policy for Investment Management
The Employees’ Pension Insurance Act stipulates thatfor the beneficiaries. The Act on the Government Pension

pension reserve funds, part of the premium collected

Investment Fund provides that GPIF must consider thefrom the pension beneficiaries, are a valuable source of

impact of the management of the reserve funds on thefunding for future pension benefits, and the purpose of

markets and other private sector activities. The Medium-Terminvesting the reserve funds is to contribute to the futureObjectives of GPIF also stipulate that GPIF is not allowed tostability of the public pension scheme through stable andselect individual stocks in equity investment.

efficient management from a long-term perspective solely○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 premiums collected from the pension beneficiaries, is a valuable sourceof funding for future pension benefits and... the purpose of the fund is to contribute to the future stability ofmanagement of the Employees’ Pension Insurance through stable and efficient management from a long–term
perspective solely for the pension 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.”72

Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme

In light of these requirements, GPIF establishes the policy

and the Promotion and Mutual Aid Corporation for Private

asset mix in the fourth Medium-term Plan for the five years

Schools of Japan.

from fiscal 2020 to fiscal 2024 from a long–term perspective,

In addition to the formulation and publication of thebased on the philosophy of diversified investment. It is

Policy for Investment Management (Operation Policy), theregarded that GPIF should take into consideration theMedium–term Plan requires GPIF to review the Operationreference portfolio jointly established by GPIF, the Federation

Policy in a timely and proper manner in light of changes

of National Public Service Personnel Mutual Aid Associations,in the economic environment and revise it promptly as

the Pension Fund Association for Local Government Officials,

required.

② Investment objectives, risk management, ensuring transparency and others
In the fourth Medium-term Objectives for the period fromand GPIF shall follow the concept that the sustainability offiscal 2020 to fiscal 2024 stipulate that a pension reserve

investee companies and the overall markets will be criticalmust achieve a long–term real return (net investment yieldfor the expansion of long-term investment returns in theon the pension reserve fund less the nominal wage growth

management of pension reserves. Based on this, GPIF shallrate) of 1.7% with minimal risks based on the financial

manage the pension reserve while paying attention to

verification. The fourth Medium-term Objectives also require

the Operation Policy mentioning that pension reserves shall

GPIF to make efforts to pay close attention not to affectbe managed and invested for the purpose of securing long-market pricing or investment activities by private sectors,

term returns for the pension beneficiaries, and implement

and to achieve the benchmark rate of return (market average

necessar y initiatives by individually examining therate of return) for the total portfolio and each asset classpromotion of investments that consider ESG (environmental,

during the period for the Medium-term Objectives.

social and governance) as non-financial factors.

Regarding risk management for the pension reserve, it

In addition, important matters regarding the introduction

stipulates that GPIF shall maintain the diversified portfolio,of new investment methods and investment targets, among

and manage and control risks of the overall portfolio, eachothers, shall be resolved upon the deliberation of the Board

asset class, each asset manager, and each custodian.

of Governors established in October 2017.

The fourth Medium–term Objectives stipulates that GPIF

An outline of the deliberations at the Board of Governors

shall combine passive and active investments, implement

is promptly published upon obtaining approval of the Board,

active investment based on the strong conviction of theby means of which we hope to help ensure the transparency

excess return, taking historical performance into account,of GPIF’s organizational operation.

③ Other important matters for pension reserve management

73

The fourth Medium–term Objectives call for thoroughstocks by itself, in due consideration of the impact oncompliance with the duty of care and fiduciary duty ofcorporate management and others.

prudent experts.

It also sets forth that GPIF should secure the liquidity

When managing the pension reserve, GPIF is required

necessary for pension payouts by taking into consideration

to consider the market size, pay close attention tothe outlook for the pension finance and the status of

prevent exposure to unfavorable market impact, andrevenues and expenditures. At the same time, GPIF is

avoid the extreme concentration of investing and/or

expected to enhance the functions necessary for assuring

withdrawing at one time.

liquidity without shortages, including selling assets in a

GPIF is also required to take appropriate measures regardingsmooth manner while giving consideration to market pricethe exercise of voting rights, and not to select individual

formation and other factors.

Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme④ Enhancement of investment capabilities, improvement of operational efficiency
In the fourth Medium-term Objectives, GPIF is expected toWith regard to improvements in operational efficiency, theclarify the area of operations requiring highly skilled

Objectives stipulate that the average cost savings during theprofessionals, while developing an environment for

Medium–term Objectives period should be at least 1.24%

attracting such talent, providing training by highly skilled

per annum based on the fiscal 2019 level. The cost-saving

professionals to improve the operational capabilities of ourtarget includes general administrative expenses (excluding

staff, and formulating a policy to secure and foster humanexpenses related to computer systems and personnel

resources strategically. It also stipulates that GPIF shallexpenses) and operational expenses (excluding expenses

explain clearly to the public the appropriateness of therelated to computer systems, fees for external asset

re m u n e r a t i o n l e ve l a p p l i e d t o s u c h h i g h l y s k i l l e dmanagers, index fees, personnel expenses, and expenses

professionals by referring to comparable ones in the private

related to short–term borrowing). Costs added or expanded

sector.

pursuant to the December 2013 Cabinet Office decision andMoreover, GPIF is expected to conduct more sophisticatedsimilar factors are excluded from the cost–saving target.

risk management by performing a forward-looking risk

Except for this additions or expansions, however, over 1.24%

analysis and a long-term analysis, and the Board ofefficiency (annually by average) from the previous year isGovernors shall monitor the management status ofrequired, and the additions and expansions are ultimately

individual portfolio risks properly.

included in the 1.24% cost– saving target from the following
fiscal year onward.

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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 theBoard of Governors, established in October 2017, operates
on a majority vote decision-making system and has
supervisory powers to determine whether decisions areproperly executed. Three Governors concurrently serve as
Auditors and form the Audit Committee, of which one is afull-time member. The Audit Committee carries out audits
of GPIF’s operations. In addition, the Audit Committee is
entrusted by the Board of Governors with the authority tosupervise the status of GPIF’s operations executed by the
President or Executive Managing Directors. The President
presides over GPIF’s operations in accordance with theprovisions of Article 7, Paragraph 1 of the Act on the
Government Pension Investment Fund. This governancesystem, including the majority vote decision-making system,
ensures the separation of decision-making and supervisionfrom the execution or implementation of said decisions.
The Board of Governors consists of 10 members: thePresident and nine professionals with an academic
background or practical experience in economics, finance,
asset management, business administration, and other fields
relevant to GPIF’s operations. Important decision-making

carried out by the Board of Governors includes developmentof the polic y asset mix and the Medium-term Plan,
preparation of annual plans and annual reports, anddecisions on important matters related to the organizationsuch as staff size. It also includes the operation of GPIF, suchas the formulation of basic policies for risk management andinternal control, the establishment of organizational rules
and other matters, approval of the appointment of theexecutive director. In fiscal 2019, the Board of Governors
made important decisions on the formulation of the fourth
Medium-term Plan and the policy asset mix which have been
applicable since April 2020, among other issues.
It has been two years and a half since our governancesystem shifted from individual decision-making by the
President to a majority voting at the Board. The root of theword “governance” is a Greek word meaning “steering.” It isessential in the practice of governance to go beyond proforma development to promote substantive reforms ofgovernance, and to carry out appropriate “steering” of theorganization in an effort to make GPIF an organization
worthy of greater trust from Japanese public.

Minister of Health, Labour and Welfare

Social Security Council(The Committee of Pension FundManagement)

Design of Public Pension Schemes/
Pension verification

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

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)75

Executive Office
Execution

Approval of
appointment of the
Executive Managing
Directors

Supervision of
execution

Separation ofdecision-making
and supervisionfrom execution

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
and business administration, discuss a broad range ofagenda items related to GPIF’s investment and operation
management from a multidimensional perspective andmake timely and appropriate decision-making. The Boardof Governors held a total of 18 meetings in fiscal 2019. An
outline of the meetings is as described in the following table.
In fiscal 2019, the Board of Governors actively discussed
the formulation of the fourth Medium-term Plan and thepolicy asset mix which have been applicable since April

2020, and developed the basic investment framework for the
next five years. Moreover, the Board of Governors also heldcareful and in-depth deliberations on important compliancematters related to executives and staff, aiming to improveand strengthen internal controls which are fundamental
to governance. The Board also received reports from the
President or other members on the asset allocation ratio
and the status of risk management for active discussion. The
details of discussion by the Board of Governors are publishedlater on the website of GPIF as a summary of agenda items.

Outline of Meetings of the Board of Governors(Fiscal2019)

Date of meeting

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

22nd meeting

April 11, 2019

(Resolution) Development of relevant regulations, etc. associated with change of era name
(Deliberation) Periodic verification of the policy asset mix

23rd meeting

May 16, 2019

(Deliberation) (i) Annual Report fiscal year 2018 (draft), (ii)Periodic verification of the policy
asset mix (2), (iii) Operations of the Board of Governors, etc.

June 6, 2019

(Resolution) (i) Change in the Board of Governors regulations, (ii) Periodic verification of thepolicy asset mix (3)(Deliberation) (i) Review of operations in fiscal 2018 (draft), (ii) Review of the expected
achievement of the third Medium-term Objectives (draft), (iii) Annual Report fiscal year 2018
(draft), (iv) Preparation of the financial statements, business report, and financial report for fiscal
2018, appropriation of profit and loss and other important matters related to accounting (draft)

25th meeting

June 28, 2019

(Resolution) (i) Review of operations in fiscal 2018 (draft), (ii) Review of the expected
achievement of the third Medium-term Objectives (draft), (iii) Annual Report fiscal year 2018
(draft), (iv) Disclosure of portfolio holdings by asset category as of the end of March 2019, (v)Preparation of the financial statements, business report, and financial report for fiscal 2018,
appropriation of profit and loss and other important matters related to accounting (draft), (vi)Approach to domestic bond investment (2)(Deliberation) Introduction of the management of new operational risks

26th meeting

July 18, 2019

(Resolution) Management of operational risks in line with the new regulations(Deliberation) (i) Procurement of data service operations for accounting and disclosure
purposes, (ii) Approach to domestic bond investment (3)27th meeting

August 27,
2019(Resolution) (i) Important matters related to organization and staff size, (ii) Procurementof data service operations for accounting and disclosure purposes, (iii) Supplementaryprocurement related to a risk management tool, (iv) Change in the portfolio risk management
regulations

28th meeting

September 30,
2019(Resolution) (i) Consent to the appointment of the Executive Managing Director (Management
and Investment Operations) and the Executive Managing Director (Planning and General
Affairs), (ii) Change in the Annual Plan, (iii) Revision of the portfolio risk management
regulations, (iv) Revision of the regulations of the restriction on re-employment of executives(Deliberation) Revision of the regulations of preparation and disclosure of the minutes of theBoard of Governors

29th meeting

October 6,
2019—30th meeting

October 11,
2019(Deliberation) Compliance issues

31st meeting

October 18,
2019(Resolution) Compliance issues (2)32nd meeting

October 24,
2019(Deliberation) Formulation of the fourth Medium-term Plan (organization and staff size)

33rd meeting

November 18,
2019(Resolution) Handling of stock lending investment (3)(Deliberation) (i) Formulation of the fourth Medium-term Plan (2), (ii) Change in theregulations of preparation and disclosure of the minutes of the Board of Governors

24th meeting

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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)

34th meeting

December 2.
2019(Resolution) (i) Office expansion, (ii) Change in the accounting regulations, (iii) Change in theregulations of preparation and disclosure of the minutes of the Board of Governors(Deliberation) (i) Formulation of the policy asset mix for the next term (10), (ii) The fourth
Medium-term Plan (3), (iii) Matters for resolution at the Board of Governors

35th meeting

December 23,
2019—(Resolution) (i) Change in the standards for payment of remuneration, etc. and salaries, etc., (ii)
Renewal of the office leasing contract
36th meeting January 9, 2020
(Deliberation) (i) Formulation of the policy asset mix for the next term, (11), (ii) The fourth
Medium-term Plan (4), (iii) Matters for resolution at the Board of Governors (2)37th meeting

38th meeting

February 6,
2020(Resolution) Important matters related to organization and staff size
(Deliberation) (i) Formulation of the policy asset mix for the next term (12), (ii) The fourth
Medium-term Plan (5), (iii) Annual budget plan for fiscal 2020 (expenditures)

March 9, 2020

(Resolution) (i) Change in target portfolio allocation of reserve funds (the reference portfolio)(draft), (ii) The fourth Medium-term Plan (draft), (iii) Important matters related to organizationand staff size, (iv) Change in the Management and Investment Policy (draft), (v) Change in theInvestment Principles (draft), (vi) Change in the portfolio management regulations (draft)(Deliberation) (i) Annual Plan for fiscal 2020 (draft), (ii) Matters for resolution at the Board ofGovernors (2)39th meeting March 26, 2020

(Resolution) Annual Plan for fiscal 2020 (draft)(Deliberation) Assessment of pension reserve fund management[3] Audit Committee
The Audit Committee executes its duties through staff
members on the Secretariat for the Audit Committee,
who assist the duties of the Audit Committee and are
independent from the President and Executive Managing
Directors. The Audit Committee also coordinates closelywith the Internal Audit Department and the Account Auditor(Deloitte Touche Tohmatsu LLC).
The Audit Committee held 21 meetings in fiscal 2019.
The Committee performed audits primarily from five
perspectives: the status of achievement of the Medium-term
Objectives; the status of execution of duties by the Board ofGovernors and Governors; the status of execution of duties
by the President and other executives and staff members; thestatus of the internal control system following the change ingovernance structure; and the status of accounting.
The Audit Committee, as part of the monitoring operation
entrusted by the Board of Governors, attends committee
meetings organized by the Executive Office, including

the Investment Committee, the Portfolio Risk Management
Committee, the Management and Planning Committee, theProcurement Committee, etc. as needed. The Audit
Committee also assesses and analyzes the status andappropriateness of GPIF’s operations through interviews
with the person in charge of each department, the President,
and Executive Managing Directors as well as investigations
at times. Then the Audit Committee reports and sharesinformation obtained through these activities with theBoard of Governors as appropriate, and gives opinions to theBoard and the President on organizational management
issues such as ways to further strengthen internal controls. In
addition, in fiscal 2019, an auditor assigned by the Audit
Committee investigated compliance matters related to
executives and staff.
The results of these audits are published as the Audit Reporton GPIF’s website.

[4] Execution system① Organization
As of April 1, 2020, GPIF has 12 executives, consisting of the
Chairperson of the Board of Governors, eight Governors(including three Governors concurrently serving as Auditors),
the President, and two Executive Managing Directors (one forPlanning and General Affairs and the other for Management77

and Investment Operations who is serving as the CIO), as well
as 145 staff members (excepting part-time staff ).
The organization consists of the Secretariat for Board ofGovernors, the Secretariat for Audit Committee, the General
Affairs Department (General Affairs Division, Accounting

Roles and Organizational Operation of Government Pension Investment Fund

Division), the Planning and Communication Department(Planning and Communication Division), the Researchand Actuary Department, the Portfolio Risk Management
Department, the Information Security Administration
Department (Information Security Administration Division,
IT Administration Division), the Investment Strategy
Department (Investment Strategy & ESG Division), the2 Organization and Internal Control System

Investment Administration Department (Investment Support
Division, Asset Management Division, Treasury Division),
the Public Market Investment Department (Public Market
Investment Division, Stewardship & ESG Division), the Private
Market Investment Department, the Internal Fixed Income
Investment Department, and the Internal Audit Department(to report directly to the President).

Organization Chart (as of April 1, 2020)
Secretariat for
Board of Governors

Board of Governors
Chairperson

Secretariat for
Audit Committee

Audit Committee

Governors

General Affairs
General Affairs
Department

President
Executive Managing Director(Planning and General Affairs)

Planning andCommunication
Department

Chief ofstaff

Accounting
Planning andCommunication

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2

Research andActuary Department

Executive Managing Director(CIO)

Portfolio Risk
Management Department

Information Security
Administration
Department

Compliance Officer

Legal Officer

Investment Strategy
Department

Information Security
Administration
IT Administration
Investment Strategy &ESG
Investment Support

Investment
Administration
Department

Asset Management
Treasury

Public Market
Investment Department

Public Market
Investment
Stewardship& ESG

Private Market
Investment Department
Internal Fixed Income
Investment Department
Internal Audit
Department

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Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System② Internal control system

79

GPIF has put an internal control system in place inmanagement. The Internal Control Committee has been

accordance with the Basic Policies of Internal Control

established to identify, analyze, and assess operational risks

established by the Board of Governors.

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

Specifically, regarding the system to ensure that theto take measures against those risks. The Internal Control

execution of duties by the President, Executive Managing

Committee also conducts risk management by drawing up

Directors, and staff members complies with laws andand promoting measures necessary to be constantly aware of

regulations, the Internal Control Committee is establishedrisk factors, prevent risks, and minimize losses in the event ofto promote internal control. In addition, the Compliancerisk occurrence.

Committee is established under the Internal Control

Specifically, regarding the system to ensure the efficiency

Committee to ensure compliance with laws and regulationsof the execution of duties, the Investment Committee has

as well as fiduciary responsibility, etc., and the Compliancebeen established to carry out prior deliberation to make

Officer and the Legal Officer are appointed. All executives

decisions on important matters related to the execution ofand staff members are informed of the necessity to comply

management operations, and holds careful discussions fromwith the Investment Principles and the Code of Conduct

a multidimensional perspective under the supervision of theand act as an organization worthy of the trust of the public.

CIO.

A whistle blowing system is also in place, and corrective

In addition to the above, the Information Security Committee

actions and preventive measures shall be taken according

promotes GPIF’s information security measures, theto our internal rules whenever an illegal or inappropriate

Management and Planning Committee carries out prioractivity is (or is expected to be) perpetrated by executives

deliberation to make decisions on important matters related

or staff members of GPIF. In addition, the Internal Audit

to execution of GPIF’s operations, and the Procurement

Department is established to conduct internal auditing ofCommittee ensures the proper state of procurement and

GPIF’s operations and related responsibilities.

subcontracting processes (excluding contracts with external

Regarding the management of the risk of losses of otherasset managers), and the Contract Monitoring Committee

related systems, the Portfolio Risk Management Committee

including external experts conducts procurement-related

has been established to appropriately monitor and handle

inspections. By these committees, GPIF is committed tovarious risks (portfolio risks) caused during the pension

establish its internal control system.

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

Concept of Internal Control
Minister of Health, Labour and Welfare
The Committee of Pension
Fund Management
Consultation(Design of Public Pension Schemes/
Pension verification)

Performance
evaluation

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

Medium-term objectives
Preparation,
instruction

Consultation Approval

Reports, opinions

Approval of Executive Managing Director(Management and Investment Operations)

GPIF
Medium-term plan

Audit

Board of Governors
Consent

Annual plan

Participation
Supervisionof execution

Audit Committee

Secretariat for
Board of Governors

Secretariat for
Audit Committee

Board of Audit
Audit

Audit and
Monitoring

Reports

President
Appointment

Account Auditor
Executive Managing Director(Planning and General Affairs)*1

Executive Managing Director(Management and Investment Operations)/CIO *2

External audit

Internal Audit Dept.

Internal Fixed Income
Investment Dept.

Private Market
Investment Dept.

Public Market
Investment Dept.

Investment
Administration Dept.

Investment
Strategy Dept.

Information Security
Administration Dept.

Portfolio Risk
Management Dept.

Research andActuary Dept.

Planning andCommunication Dept.

General Affairs Dept.

System to ensure legal and regulatorycompliance in the execution of duties

System for retention and management of
information concerning the execution of duties

Internal Control Committee

Information Security
Committee

Management andPlanning Committee

Investment Committee

Compliance Committee

Chief Information
Security Officer

Procurement
Committee

Contract Monitoring
Committee

C
h
a
p
t
e
r

2

System to secure the efficiency
in the execution of duties

CIO (Chief Investment Officer)

Compliance Officer
Risk of losses management system

Whistle-blowing liaison[Legal Counsel]

Legal Officer

Portfolio Risk Management
Committee

Information Systems Committee

Whistle-blowing system

Internal Control Committee

Chief Information Officer

Sanctions Committee
Reliability ensuring system including financial reporting
Disciplinary Committee

Tripartite Audit Committee(Audit Committee, Account Auditor, Internal Audit Department)*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, the Investment Administration Department, the Public Market Investment Department, the Private Market Investment Department, and theInternal Fixed Income Investment Department.

80

Chapter 3

Reference Data

1 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 2019)Market value (¥billion)

Portfolio allocation (%)

Total (Investment assets)

150,633.2

100.00

Total
MarketPassive investments
investments
Active investments

149,737.0

99.41

118,602.6

78.74

31,134.4

20.67

896.2

0.59

FILP bonds

Market value (¥billion)

Portfolio allocation (%)

Total (Investment assets)

150,633.2

100.00Total

36,229.7

24.05

Passive investments

25,884.7

17.18

Active investments

10,345.1

6.87

Total

35,563.0

23.61

Passive investments

32,336.0

21.47

Active investments

3,226.9

2.14

Total

36,408.7

24.17

Passive investments

26,871.8

17.84

Active investments

9,536.9

6.33

Total

37,163.9

24.67

Passive investments

33,510.0

22.25

Active investments

3,653.9

2.43

Short-term assets (Active investments)

4,371.6

2.90

FILP bonds

896.2

0.59

Domesticbonds

Domestic
equities

Foreignbonds

Foreignequities(Note 1) The figure in the market value column for FILP bonds includes accrued income in the book value amount basedon 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

FY2014FY2015FY2016FY2017FY2018Domestic
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

71.45

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

28.55

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

90.93

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

9.07

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

73.81

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

26.19

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

90.17

Total

81

FY2019Active

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

9.83

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

79.21

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

20.79

[3] Investment assets by manager, etc. (market value at the end of fiscal 2019)(Unit: ¥billion)
Investment
methodAsset manager name (Subcontractor, etc.)
Asset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)State Street Global Advisors (Japan) Co., Ltd.Ⅰ

Domestic
bonds passive
investment

Domestic
bonds
activeinvestment

Marketvalue

BPI

1,156.4

(Unit: ¥billion)
Investment
methodAsset manager name (Subcontractor, etc.)
Asset Management One Co., Ltd. Ⅹ(former Mizuho Trust & Banking)State Street Global Advisors (Japan) Co., Ltd. Ⅱ

BPI

1,295.0

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ

BPI

1,295.1

BlackRock Japan Co., Ltd. Ⅲ

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ

BPI-G

1,555.2

BlackRock Japan Co., Ltd. Ⅳ

Mitsubishi UFJ Trust and Banking CorporationⅠ

BPI-G

1,205.0In-house investmentⅠ

BPI

1,365.7

In-house investment Ⅱ

BPI-G

9,332.4

In-house investment Ⅲ

BPI-C

8,679.9

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

BPI-TIPS

1,105.9

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

952.0

MU Investments Co., Ltd.

BPI-TIPS

710.9

Tokio Marine Asset Management Co., Ltd.

BPI-TIPS

947.7

PGIM Japan Co., Ltd.Ⅰ

BPI-TIPS

638.5

Nomura Asset Management Co., Ltd. Ⅳ

BlackRock Japan Co., Ltd. Ⅴ
BlackRock Japan Co., Ltd. Ⅵ

Foreignbonds
passiveinvestment

BlackRock Japan Co., Ltd. Ⅶ
BlackRock Japan Co., Ltd. ⅧBlackRock Japan Co., Ltd. Ⅸ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ
Resona Asset Management Co., Ltd. Ⅱ
Resona Asset Management Co., Ltd. Ⅲ
Resona Asset Management Co., Ltd. Ⅳ
Resona Asset Management Co., Ltd. Ⅴ
Resona Asset Management Co., Ltd. Ⅵ
Resona Asset Management Co., Ltd. Ⅶ

ManagerbenchmarkMarketvalue

WGBI

2,292.9

WGBI
WGBI
WGBI
WGBI-OUSGOVUSGOV-H
USGOV
1-3Y
EGBI
EGBI-H
WGBI
WGBI
WGBI-OUSGOVUSGOV-H
USGOV
1-3Y
EGBI
EGBI-H

2,337.0
2,893.5
3,214.0
30.1
3,254.5
572.9
262.6
847.5
270.5
2,296.6
2,746.1
61.6
3,201.3
553.0
318.4
1,256.7
462.5

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

BPI-TIPS

549.9

Resona Asset Management Co., Ltd. Ⅷ

Manulife Asset Management (Japan) LimitedⅠ

BPI-TIPS

427.9

BPI-TIPS

955.5

G-AGGEXC

580.3

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

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

Mitsubishi UFJ Trust and Banking Corporation Ⅱ

BPI-TIPS

949.3

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

184.8

—

2,953.5

GBIEMGDEXC

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

TOPIX

8,239.7

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

EMBIGD

82.5

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

JPX

292.2

Asset Management One Co., Ltd. Ⅵ(former Mizuho Trust & Banking)RN-P

1,420.7

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

Asset Management One Co., Ltd. Ⅶ

FTSE-BL

547.7

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

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

SP-G

1,696.9

T. Rowe Price Japan, Inc.
(T. Rowe Price International Ltd.)EUROHY2%

43.8

Nomura Asset Management Co., Ltd.Ⅰ

RAFI

1,535.3

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

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

654.6

TOPIX

88.9

G-AGGEXCUSHY2%

125.9

BlackRock Japan Co., Ltd.Ⅰ

TOPIX

3,812.0

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

BlackRock Japan Co., Ltd. Ⅱ

FTSE-BL

383.7

PineBridge Investments Japan Co., Ltd.
(PineBridge Investments LLC)

USHY2%

45.2

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ

TOPIX

3,308.6

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

EUROAGG

504.1

In-house investment Ⅳ

Domestic
equities
passiveinvestment

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

Foreignbonds
activeinvestment

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

G-AGGEXC
G-AGGEXC
G-AGGEXC

G-AGGEXC
G-AGGEXC

276.9
522.5
735.1

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ

JPX

515.6

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅵ

SP-C

980.2

Mitsubishi UFJ Trust and Banking Corporation Ⅲ

TOPIX

4,210.9

Mitsubishi UFJ Trust and Banking Corporation Ⅳ

JPX

380.1

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

USAGG

694.8

MSCIESG

1,306.1

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

G-AGGEXC

444.0

Mitsubishi UFJ Trust and Banking Corporation Ⅵ

MSCIWIN

797.8

Barings Japan Limited(Barings LLC, etc.)

USHY2%

46.2

Resona Asset Management Co., Ltd.Ⅰ

TOPIX

2,819.5

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

TOPIX

531.1

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

82.1

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

138.0

UBS Asset Management (Japan) LtdⅠ(UBS Asset Management (UK) Ltd)

Mitsubishi UFJ Trust and Banking Corporation Ⅴ

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

RN-SG

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

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

Eastspring Investments Limited(Eastspring Investments (Singapore) Limited)

TOPIX

Invesco Asset Management (Japan) Limited

TOPIX

194.4

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

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

TOPIX

434.1

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

JPMorgan Asset Management (Japan) Limited
Domestic
equities active Schroder Investment Management (Japan) LimitedⅠ
investment
Nikko Asset Management Co., Ltd.Ⅰ

USHY2%
EUROHY
2%
G-AGGEXC

841.8

772.7
43.7
136.7
563.3

MSCI-AEXC

14,696.8

RN-V

319.4

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

MSCI - N

1,826.7

245.3

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

MSCI - EU

345.3

TOPIX

186.4

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

MSCI - P

62.5

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

MSCI-EXC

35.5

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

SP-GC

1,710.6

BlackRock Japan Co., Ltd. Ⅺ

MSCI-AEXC

2,350.2

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅷ

MSCI-AEXC

7,832.5

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

MSCI-AEXC

4,647.8

RN-S

47.8

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

MSCI-JS

209.4

FIL Investments (Japan) Limited Ⅱ

TOPIX

337.3

Sumitomo Mitsui DS Asset Management Company, LimitedⅠ

RN-V

314.5

TOPIX

166.0

Foreignequities
passiveinvestment

3

701.2

TOPIX

Nomura Asset Management Co., Ltd. Ⅱ

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

G-AGGEXC
G-AGGEXC

931.0

C
h
a
p
t
e
r

82

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc

(Unit: ¥billion)
Investment
methodForeignequities
activeinvestment

ManagerbenchmarkMarketvalue

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

MSCI-E

84.6

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

MSCI-K

541.0

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

MSCI-K

760.1

Nomura Asset Management Co., Ltd. Ⅶ

MSCI-E

83.9

BNY Mellon Asset Management Japan Limited Ⅱ(Walter Scott & Partners Limited)

MSCI-K

466.4

Mitsubishi UFJ Trust and Banking Corporation Ⅶ(Baillie Gifford Overseas Limited)

MSCI-A

684.5

UBS Asset Management (Japan) Ltd Ⅱ(UBS Asset Management (UK) Ltd)MSCI-K

818.7

Lazard Japan Asset Management K.K.
(Lazard Asset Management LLC)

MSCI-E

48.9

—

58.3

Asset manager name (Subcontractor, etc.)

DBJ Asset Management Co., Ltd.

Alternative
infrastructure

Alternative
private equity
Alternative
real estate
Short-term
assetsGatekeeper : Nomura Asset Management Co., Ltd. Ⅷ
Fund of Funds Manager : Pantheon

—

101.3

Gatekeeper : Sumitomo Mitsui DS Asset Management
Company, Limited Ⅱ
Fund of Funds Manager : StepStone Infrastructure & Real
Assets—230.8In-house investment Ⅴ(Unit Trust Manager : Nissay Asset Management Corporation)

—

154.7

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

—

18.5

Gatekeeper : Asset Management One Co., Ltd. ⅩⅢ
Fund of Funds Manager : CBRE Global Investment Partners
Limited—240.9

Mitsubishi UFJ Trust and Banking Corporation Ⅷ

—

139.9

In-house investment Ⅶ—

4,281.1

In-house investment Ⅷ

—

90.4

Subtotal
FILP bonds
Total

—

149,732.5

In-house investment Ⅸ

—

896.2

36 asset managers, 114 Funds—

150,628.7

Manager benchmark

Domesticbonds

Domestic
equities

NOMURA-BPI (excluding ABS)

Nomura ResearchInstitute, Ltd.

BPI-GNOMURA-BPI Government Bonds

Nomura ResearchInstitute, Ltd.

BPI-TIPSNOMURA-BPI plus Inflation-Linked Bonds

Nomura ResearchInstitute, Ltd.

BPI-C

NOMURA-BPI/GPIF Customized

TOPIX

TOPIX (incl. dividends)

JPX

JPX-Nikkei Index 400 (incl. dividends)

RN-P

RUSSELL/NOMURA Prime Index (incl. dividends)

Nomura ResearchInstitute, Ltd.

RN-V

RUSSELL/NOMURA Large Cap Value Index (incl.
dividends)

Nomura ResearchInstitute, Ltd.

RN-S

RUSSELL/NOMURA Small Cap Index (incl. dividends)

Nomura ResearchInstitute, Ltd.

RN-SG

RUSSELL/NOMURA Small Cap Growth Index (incl.
dividends)

Nomura ResearchInstitute, Ltd.

(Unit: ¥billion)

MSCI G.K.
MSCI G.K.

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

SP-C

S&P/JPX Carbon Efficient Index

FTSE International
LimitedS&P Opco, LLC

SP-GS&P GIVI Japan (Gross Total Return)S&P Opco, LLC

RAFINomura RAFI Index

Nomura AssetManagement Co., Ltd.

WGBIFTSE World Government Bond Index (not incl. JPY,
no hedge/JPY basis)

FTSE Fixed Income LLC

WGBI-OFTSE World Government Bond Index (not incl. JPY,
USD, EMU Government Bond, no hedge/JPY basis)

FTSE Fixed Income LLC

USGOVFTSE US Government Bond Index (no hedge/JPY
basis)FTSE Fixed Income LLC

FTSE-BLFTSE Blossom Japan Index

USGOV-H
USGOV
1-3Y
EGBI

Investment
methodCustody

Custodian, etc. name
Trust & Custody Services Bank, Ltd. (Domestic bonds, Short-term assets)

41,253.2

State Street Trust and Banking Co., Ltd.
(Foreign bonds, Alternative assets, Short-term assets)

25,314.0

Japan Trustee Services Bank, Ltd. (Domestic equities)

32,633.5

The Master Trust Bank of Japan, Ltd.
(Domestic equities, Foreign bonds, Foreign equities, Short-term assets)

Total

Transition
management

Total

Marketvalue

0.1

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

0.6BlackRock Japan Co., Ltd. ⅩⅢ(Foreign equities)(BlackRock Asset Management North Asia Limited)

0.1

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

0.3

FTSE US Government Bond Index (JPY hedged/JPY
basis)FTSE US Government Bond Index 1-3years (nohedge/JPY basis)
FTSE EMU Government Bond Index (no hedge/JPY
basis)FTSE EMU Government Bond Index (JPY hedged/
JPY basis)
Bloomberg Barclays Global Aggregate Index (notincl. JPY, CNY, no hedge/JPY basis)
Bloomberg Barclays US Aggregate Index(no hedge/JPY basis)

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 Barclays EURO Aggregate Index
Bloomberg Index(no hedge/JPY basis)
Services Limited
Bloomberg Barclays US Corporate High Yield
Bloomberg Index
USHY2%
2% Issuer Capped Bond Index (no hedge/JPY basis) Services Limited
Bloomberg Barclays EURO Corporate High Yield
Bloomberg Index
EUROHY2%
2% Issuer Capped Bond Index (no hedge/JPY basis) Services Limited
J.P. Morgan EMBI Global Diversified (no hedge/JPY J.P.Morgan Securities
EMBIGDbasis)LLC
GBIJ.P. Morgan Government Bond Index-Emerging
J.P.Morgan Securities
EMGD- Markets Global Diversified Index (not incl. China, no
LLC
EXC
hedge/JPY basis)
MSCI ACWI (not incl. JPY, JPY basis, incl. dividends,
MSCI-AMSCI G.K.
after taking into account GPIF dividend tax factors)
MSCI ACWI (not incl. JPY,China A, JPY basis, incl.
MSCI-Adividends, after taking into account GPIF dividend MSCI G.K.
EXC
tax factors)
MSCI KOKUSAI (JPY basis, incl. dividends,
MSCI-KMSCI G.K.
after taking into account GPIF dividend tax factors)
MSCI North America (JPY basis, incl. dividends, after
MSCI-NMSCI G.K.
taking into account GPIF dividend tax factors)
EUROAGG

51,429.3

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

G-AGGEXC
USAGG

150,629.9

1.1(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 36 asset managers in the total column do not include in-house
investment, the 114 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 (114 funds managed by 36 asset 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: ¥3.3 billion) from closed funds(statutory trust accounts).
(Note5) Manager benchmarks are shown in the following table and the sources of
those benchmarks are as listed in the right-hand column of the following
table.

83

Foreignbonds

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

MSCI-JS MSCI Japan Small (incl. dividends)
MSCI-ESG MSCI Japan ESG Select Leaders Index

EGBI-H

Source of benchmark

BPI

Foreignequities

MSCI Europe & Middle East (JPY basis, incl.
MSCI - EU dividends, after taking into account GPIF dividend
tax factors)
MSCI Pacific (not incl. JPY, JPY basis, incl. dividends,
MSCI-Pafter taking into account GPIF 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

MSCI G.K.
MSCI G.K.
MSCI G.K.
MSCI G.K.
S&P Opco, LLC

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc[4] I nvestment per formance by manager, etc.
① Investment performance (over the last year) (from April 2019 to March 2020)
Investment
methodDomestic
bonds passive
investment

Domestic
bonds active
investment

Domestic
equities
passiveinvestment

Asset manager nameTime-weighted return(A)

Benchmark return(B)

Excess rate of return(C)=(A)–(B)+0.00%

Asset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)State Street Global Advisors (Japan) Co., Ltd.Ⅰ–0.18%–0.18%–0.14%–0.18%+0.03%

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ–0.16%–0.18%+0.02%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ–0.18%–0.17%–0.01%

Mitsubishi UFJ Trust and Banking CorporationⅠ–0.22%–0.17%–0.05%

In-house investmentⅠ–0.11%–0.18%+0.07%

In-house investment Ⅱ
In-house investment Ⅲ–0.16%–0.17%+0.02%–0.33%–0.49%+0.15%

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

0.07%–0.21%+0.28%

0.11%–0.21%+0.32%MU Investments Co., Ltd.

0.15%

–0.21%+0.36%

Tokio Marine Asset Management Co., Ltd.

–0.00%–0.21%+0.20%+0.12%PGIM Japan Co., Ltd.Ⅰ–0.08%–0.21%PIMCO Japan LtdⅠ

–0.25%–0.21%–0.04%

Manulife Asset Management (Japan) LimitedⅠ

0.09%–0.21%+0.29%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

0.01%–0.21%+0.22%

Mitsubishi UFJ Trust and Banking Corporation Ⅱ

0.00%–0.21%+0.21%

In-house investment Ⅳ–2.60%——

Asset Management One Co., Ltd. Ⅳ (former DIAM)–9.45%–9.50%+0.06%

Asset Management One Co., Ltd. Ⅴ (former DIAM)
Asset Management One Co., Ltd. Ⅵ (former Mizuho Trust & Banking)–8.94%–8.96%+0.02%–9.21%–9.26%+0.05%–1.03%

Asset Management One Co., Ltd. Ⅶ–7.98%–6.95%

Goldman Sachs Asset Management Co., Ltd.Ⅰ–12.78%–12.57%–0.21%

Nomura Asset Management Co., Ltd.Ⅰ–12.45%–12.53%+0.08%FIL Investments (Japan) LimitedⅠ–9.46%–9.50%+0.04%

BlackRock Japan Co., Ltd.Ⅰ–9.47%–9.50%+0.03%

BlackRock Japan Co., Ltd. Ⅱ–6.98%–6.95%–0.02%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ–9.50%–9.50%–0.00%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ–8.97%–8.96%–0.01%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅵ–9.46%–9.21%–0.25%

Mitsubishi UFJ Trust and Banking Corporation Ⅲ–9.47%–9.50%+0.03%

Mitsubishi UFJ Trust and Banking Corporation Ⅳ
Mitsubishi UFJ Trust and Banking Corporation Ⅴ–8.94%–8.96%+0.03%–3.89%–3.39%–0.50%

Mitsubishi UFJ Trust and Banking Corporation Ⅵ–5.16%–4.78%–0.38%

Resona Asset Management Co., Ltd.Ⅰ–9.49%–9.50%+0.01%

Asset Management One Co., Ltd. Ⅷ (former DIAM)–10.82%–9.50%–1.32%

Asset Management One Co., Ltd. Ⅸ (former Mizuho Asset Management)–19.37%–13.61%–5.76%

Eastspring Investments Limited–19.08%–9.50%–9.57%

Invesco Asset Management (Japan) Limited–12.30%–9.50%–2.79%

Capital International K.K.

–7.89%–9.50%+1.62%+2.72%

JPMorgan Asset Management (Japan) Limited
Domestic
equities active Schroder Investment Management (Japan) LimitedⅠ
investment
Nikko Asset Management Co., Ltd.Ⅰ–14.02%–16.74%–11.19%–9.50%–1.69%–9.49%–9.50%+0.01%

Nomura Asset Management Co., Ltd. Ⅱ–15.01%–13.61%–1.40%

Nomura Asset Management Co., Ltd. Ⅲ–13.28%–12.97%–0.31%FIL Investments (Japan) Limited Ⅱ–4.22%–9.50%+5.28%

Sumitomo Mitsui DS Asset Management Company, LimitedⅠ–16.73%–16.74%+0.01%

Russell Investments Japan Co., Ltd.Ⅰ–11.62%–9.50%–2.11%

3.81%

3.65%

+0.16%

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

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

4.55%

4.37%

+0.18%

Nomura Asset Management Co., Ltd. Ⅳ

4.59%

4.41%

+0.18%

BlackRock Japan Co., Ltd. Ⅲ
BlackRock Japan Co., Ltd. Ⅳ

4.67%

4.53%

+0.14%–2.57%–2.40%–0.18%

BlackRock Japan Co., Ltd. Ⅴ

10.42%

10.27%+0.14%

BlackRock Japan Co., Ltd. Ⅵ

9.99%

10.07%–0.08%

BlackRock Japan Co., Ltd. Ⅶ

2.79%

2.68%

+0.11%

BlackRock Japan Co., Ltd. Ⅷ–0.24%–0.52%+0.28%

BlackRock Japan Co., Ltd. Ⅸ

4.79%

4.78%

+0.01%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ

4.60%

4.37%

+0.23%

Resona Asset Management Co., Ltd. Ⅱ

4.52%

4.37%

+0.15%

Resona Asset Management Co., Ltd. Ⅲ–2.55%–2.40%–0.15%

Resona Asset Management Co., Ltd. Ⅳ

10.47%

10.27%+0.20%

Resona Asset Management Co., Ltd. Ⅴ
Resona Asset Management Co., Ltd. Ⅵ

10.16%

10.07%+0.09%

2.78%

2.68%

+0.09%

Resona Asset Management Co., Ltd. Ⅶ–0.41%–0.52%+0.11%

Resona Asset Management Co., Ltd. Ⅷ

5.75%

5.67%

+0.08%

Remarkscolumn

C
h
a
p
t
e
r

3

84

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc

Investment
methodForeignbonds
activeinvestment

Foreignequities
passiveinvestment

Foreignequities
activeinvestment

Asset manager nameTime-weighted return(A)

Benchmark return(B)

Excess rate of return(C)=(A)–(B)

Asset Management One Co., Ltd. Ⅺ (former Mizuho Asset Management)–0.46%

1.86%–2.33%

Ashmore Japan Co., Ltd–17.30%–8.95%–8.35%

AllianceBernstein Japan Ltd.

–12.92%–9.13%–3.78%

Goldman Sachs Asset Management Co., Ltd. Ⅱ

0.27%

1.86%

–1.59%

Schroder Investment Management (Japan) Limited Ⅱ–1.70%

1.86%–3.57%

Sompo Japan Nipponkoa Asset Management Co., LTD.

0.62%

1.86%

–1.25%

Nomura Asset Management Co., Ltd. Ⅴ–9.29%

1.86%–11.15%

Nomura Asset Management Co., Ltd. Ⅵ–9.78%–9.23%–0.55%BNY Mellon Asset Management Japan LimitedⅠ–3.02%–2.57%–0.45%PGIM Japan Co., Ltd. Ⅱ–0.78%

1.86%–2.65%PIMCO Japan Ltd Ⅱ–0.40%

1.86%–2.26%FIL Investments (Japan) Limited Ⅲ

0.57%

6.34%

–5.77%

BlackRock Japan Co., Ltd. Ⅹ–0.79%

1.86%–2.66%

Manulife Asset Management (Japan) Limited Ⅱ–2.97%

1.86%–4.83%Morgan Stanley Investment Management (Japan) Co., Ltd.Ⅰ–0.84%

1.86%–2.70%UBS Asset Management (Japan) LtdⅠ

–13.88%–14.35%+0.47%

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

–5.48%

1.86%–7.34%

State Street Global Advisors (Japan) Co., Ltd. Ⅲ–13.44%–13.47%+0.02%

State Street Global Advisors (Japan) Co., Ltd. Ⅳ–10.57%–10.08%–0.49%

State Street Global Advisors (Japan) Co., Ltd. Ⅴ–17.19%–17.24%+0.05%

State Street Global Advisors (Japan) Co., Ltd. Ⅵ–25.47%–25.48%+0.01%

State Street Global Advisors (Japan) Co., Ltd. Ⅶ–20.16%–20.28%+0.12%

State Street Global Advisors (Japan) Co., Ltd. Ⅷ–12.89%–12.81%–0.08%

BlackRock Japan Co., Ltd. Ⅺ–13.44%–13.47%+0.02%+0.03%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅷ–13.44%–13.47%

Legal & General Investment Management Japan KK–13.51%–13.47%–0.04%

Asset Management One Co., Ltd. Ⅻ (former Mizuho Asset Management)–13.88%–19.72%+5.84%MFS Investment Management K.K.

–13.30%–12.47%–0.83%

Nikko Asset Management Co., Ltd. Ⅱ–14.40%–12.47%–1.92%

Nomura Asset Management Co., Ltd. Ⅶ–23.88%–19.72%–4.16%BNY Mellon Asset Management Japan Limited Ⅱ–4.67%–12.47%+7.80%

Mitsubishi UFJ Trust and Banking Corporation Ⅶ–8.83%–12.81%+3.98%UBS Asset Management (Japan) Ltd Ⅱ–7.82%–12.47%+4.66%

Lazard Japan Asset Management K.K.

–21.27%–19.72%–1.56%

Remarkscolumn② Investment performance (alternative assets)
Alternative
assetsInfrastructure

Private equity
Real estate

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

Asset manager nameIRR
(local currency)

IRR
(JPY)

Local
currency

Start ofinvestment
March 2018

1.57%

1.57%

JPY

0.17%

0.00%

USD

April 2018

2.75%
2.75%
4.25%
4.03%
4.88%
5.97%

1.71%
1.06%
2.76%
2.85%
2.44%
5.97%

USD
USD
USD
USD
USD
JPY

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

DBJ Asset Management Co., Ltd.
Nomura Asset Management Co., Ltd. Ⅷ
Sumitomo Mitsui DS Asset Management Company, Limited Ⅱ
In-house investment Ⅴ
In-house investment Ⅵ
Asset Management One Co., Ltd. Ⅷ
Mitsubishi UFJ Trust and Banking Corporation Ⅷ(Note 1) Funds are listed in the order of the Japanese syllabary.
(Note 2) Asset managers entrusted with investment for more than one contract 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 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 theinvestment period.
(Note 8) Domestic assets (currency: JPY) are managed separately from foreign assets (currency: USD).
(Note 9) Alternative assets listed above are those that were established by the end of March 2020.

85

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc[5] I nvestment fees (3 year cumulative)(Unit: ¥)Investment
methodDomestic
bonds passive
investment

Domestic
bonds active
investment

Domestic
equities
passiveinvestment

Asset manager name

Investment
fees

Asset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)State Street Global Advisors (Japan) Co., Ltd.Ⅰ(Unit: ¥)Asset manager name

Investment
fees

180,544,508

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

109,092,384

147,738,838

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

130,094,923

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ

257,011,545

Nomura Asset Management Co., Ltd. Ⅳ

63,384,990

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅱ

26,902,081

BlackRock Japan Co., Ltd. Ⅲ

212,897,308

BlackRock Japan Co., Ltd. Ⅶ

14,606,419

BlackRock Japan Co., Ltd. Ⅷ

40,360,764

RemarkscolumnInvestment
methodForeignbonds passive
investment

RemarkscolumnMitsubishi UFJ Trust and Banking CorporationⅠ

30,670,852

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

856,102,090

Asset Management One Co., Ltd. Ⅲ(former Mizuho Trust & Banking)825,478,189

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ

28,261,085

ＭＵ Investments Co., Ltd.

668,805,359

Resona Asset Management Co., Ltd. Ⅱ

37,106,146

Tokio Marine Asset Management Co., Ltd.

698,376,143

Resona Asset Management Co., Ltd. Ⅵ

7,639,301

PGIM Japan Co., Ltd.Ⅰ

507,688,081

Resona Asset Management Co., Ltd. Ⅶ

27,012,416

PIMCO Japan LtdⅠ

642,038,005

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

1,472,964,333

Manulife Asset Management (Japan) LimitedⅠ

613,941,837

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

2,771,943,128

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

802,425,412

Ashmore Japan Co., Ltd

1,410,162,041

Mitsubishi UFJ Trust and Banking Corporation Ⅱ

724,172,153

AllianceBernstein Japan Ltd.

140,630,609

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

334,938,758

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

126,081,851

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

26,014,867

Asset Management One Co., Ltd. Ⅶ

40,955,228

Goldman Sachs Asset Management Co., Ltd.Ⅰ

2,486,520,937

Nomura Asset Management Co., Ltd.Ⅰ

5,028,599,333

BlackRock Japan Co., Ltd.Ⅰ

65,687,073

BlackRock Japan Co., Ltd. Ⅱ

81,584,947

BlackRock Japan Co., Ltd. ⅩⅤ

17,984,880

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ

Foreignbonds active
investment○

Goldman Sachs Asset Management Co., Ltd. Ⅱ

785,468,937

Schroder Investment Management (Japan) LimitedⅡ

1,774,896,170

Sompo Japan Nipponkoa Asset Management Co., Ltd.

1,889,958,730

Nomura Asset Management Co., Ltd. Ⅴ

2,533,233,394

Nomura Asset Management Co., Ltd. Ⅵ

521,483,133

BNY Mellon Asset Management Japan LimitedⅠ

1,446,727,174

PGIM Japan Co., Ltd. Ⅱ

2,103,478,942

PIMCO Japan Ltd Ⅱ

2,676,426,933

FIL Investments (Japan) Limited Ⅲ

1,888,262,059

BlackRock Japan Co., Ltd. Ⅹ

625,646,003

28,020,686

Manulife Asset Management (Japan) Limited Ⅱ

1,205,357,101

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ

71,905,166

Morgan Stanley Investment Management (Japan) Co., Ltd.Ⅰ

1,976,392,794

Mitsubishi UFJ Trust and Banking Corporation Ⅲ

158,340,406

UBS Asset Management (Japan) LtdⅠ

628,594,104

Mitsubishi UFJ Trust and Banking Corporation Ⅳ

93,839,629

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

3,279,389,630

Mitsubishi UFJ Trust and Banking Corporation Ⅴ

314,798,117

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

512,256,995

Mitsubishi UFJ Trust and Banking Corporation Ⅵ

221,531,449

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

40,686,177

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

792,276,731

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

522,756,627

Eastspring Investments Limited

977,841,419

Invesco Asset Management (Japan) Limited

1,499,740,745

Capital International K.K.

2,092,047,090

JPMorgan Asset Management (Japan) Limited

901,608,655

Domestic
Schroder Investment Management (Japan) LimitedⅠ
equities active
SEIRYU Asset Management Ltd.
investment
Nikko Asset Management Co., Ltd.Ⅰ

911,178,383
442,098,825
594,095,042

Foreignequities
passiveinvestment

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

12,114,446

BlackRock Japan Co., Ltd. Ⅺ

532,966,482

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅷ

360,573,678

Resona Asset Management Co., Ltd. Ⅸ

132,141,173

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

1,489,844,629

MFS Investment Management K.K.

2,710,840,008

Nikko Asset Management Co., Ltd. Ⅱ

3,354,500,219

Foreign
Nomura Asset Management Co., Ltd. Ⅶ
equities active
BNY Mellon Asset Management Japan Limited Ⅱ
investment
Mitsubishi UFJ Trust and Banking Corporation Ⅶ

○

○

C
h
a
p
t
e
r

3

517,466,171
8,856,677,625
3,708,139,212

Nomura Asset Management Co., Ltd. Ⅱ

806,303,926

10,572,723,454

Nomura Asset Management Co., Ltd. Ⅲ

UBS Asset Management (Japan) Ltd Ⅱ

1,316,505,145

Lazard Japan Asset Management K.K.

320,364,499

FIL Investments (Japan) Limited Ⅱ

1,290,622,675

Sumitomo Mitsui DS Asset Management Company, LimitedⅠ

637,131,292

Russell Investments Japan Co., Ltd.Ⅰ

2,034,360,839(Unit: ¥)Investment
methodCustody

Transition
management

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,
Short-term assets)
Nomura Asset Management Co., Ltd. Ⅸ(Domestic equities)
BlackRock Japan Co., Ltd. ⅩⅣ (Domestic equities)
Russell Investments Japan Co., Ltd. Ⅱ(Domestic equities)
BlackRock Japan Co., Ltd. Ⅻ (Foreign bonds)
BlackRock Japan Co., Ltd. ⅩⅢ (Foreign equities)
Russell Investments Japan Co., Ltd. Ⅲ(Foreign equities)

Investment fees
265,812,325
9,550,216,423
1,928,610,647
23,832,657,692
3,260,000
13,811,373
162,000
12,526,236
15,521,204
54,00086

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc(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) Fees include consumption tax.
(Note 4) A circle in the remarks column indicates an external asset manager closed in fiscal 2019 with less than three years of investment period since April
2017.
(Note 5) Fees paid to custodians include certain expenses that are deducted from the entrusted assets, such as custody fees and attorney fees.
(Note 6) The investment fees of State Street Trust and Banking Co., Ltd., related to alternative assets is ¥140,701,933.

Investment returns and fees by securities lending investment. (3 year cumulative)(Unit: ¥)Asset class

Investment returns

Investment fees

Domestic bonds

6,768,108,200

588,081,568

Foreign bonds

49,669,951,466

12,215,829,098

Foreign equities

35,559,040,974

7,482,954,186(Note 1) Returns in the table represent premium charges excluding fees.
(Note 2) Fees indicate management fees and agent fees.

87Reference Data

2 Portfolio holdings by asset category as of Mar 31,2020

2 Portfolio holdings by asset category as of Mar 31,2020
These are lists to summarize the GPIF’s top 10 portfolio holdings as of March 31, 2020 (as of the end of fiscal 2019), either
indirectly through external asset managers or directly with the GPIF’s in-house capacity for bonds, by name for bonds andequities.
These do not purport to represent GPIF’s evaluation of individual companies.
〇 Domestic equities holdings in order of market value〇 Domestic bonds holdings in order of market value
1

10-year Inflation-Indexed Bonds JGB #20

Market value(¥100 million)
10,440

1

TOYOTA MOTOR CORP.

206,102,800

Market value(¥100 million)
13,6462

10-year Inflation-Indexed Bonds JGB #21

6,261

2

SONY CORP.

106,333,700

6,854

3

10-year Inflation-Indexed Bonds JGB #19

5,392

3

NIPPON TELEGRAPH & TELEPHONE CORP.

248,027,900

6,506

4

Fixed-rate Bonds JGB #357

4,300

4

KEYENCE CORP.

15,024,300

5,248

5

Fixed-rate Bonds JGB #170

4,126

5

KDDI CORP.

152,841,300

4,967

6

Fixed-rate Bonds JGB #168

3,671

6

MITSUBISHI UFJ FINANCIAL GROUP, INC.

1,183,808,400

4,920

7

Fixed-rate Bonds JGB #169

3,559

7

NTT DOCOMO, INC.

137,149,000

4,714

8

10-year Inflation-Indexed Bonds JGB #22

3,501

8

SOFTBANK GROUP CORP.

122,740,300

4,676

9

Fixed-rate Bonds JGB #141

3,301

9

TAKEDA PHARMACEUTICAL CO., LTD.

136,844,600

4,650

10

Fixed-rate Bonds JGB #356

3,226

10

NINTENDO CO., LTD.

374,963

Total

No.

Security nameTotal

5,276 securities

No.

〇 Foreign bonds holdings in order of market value

Security nameShares9,445,900

2,389 securities

3,989
353,082〇 Foreign equities holdings in order of market value

1

US TREASURY N/B 1.875PCT 31JAN22

1

MICROSOFT CORP

67,993,219

Market value(¥100 million )11,576

2

US TREASURY N/B 1.5PCT 15AUG26

1,620

2

APPLE INC

39,309,014

10,791

3

US TREASURY N/B 2.75PCT 15FEB28

1,598

3

AMAZON.COM INC

3,925,907

8,263

4

US TREASURY N/B 2.375PCT 15MAY29

1,466

4

FACEBOOK INC-CLASS A

21,510,437

3,873

5

US TREASURY N/B 2.375PCT 15AUG24

1,462

5

ALPHABET INC-CL C

2,945,117

3,697

6

FRANCE (GOVT OF) FRTR 5 1/2 04/25/29

1,319

6

ALPHABET INC-CL A

2,821,148

3,539

7

US TREASURY N/B 2.625PCT 15FEB29

1,311

7

ALIBABA GROUP HOLDING-SP ADR

16,075,104

3,375

8

FIDELITY US BANK LOAN FUND

1,300

8

JOHNSON & JOHNSON

22,819,134

3,230
3,068

No.

Security nameMarket value(¥100 million )
1,711

No.

Security nameShares9

US TREASURY N/B 3.125PCT 15NOV28

1,283

9

VISA INC-CLASS A SHARES

17,638,900

10US TREASURY N/B 2.25PCT 15NOV25

1,268

10

NESTLE SA-REG

26,625,324

Total

8,643 securities

349,878

Total

2,722 securities

2,954

C
h
a
p
t
e
r

366,829

3〇 Alternative Assets holdings in order of market value
No.

Alternative Assets

Security nameMarket value(¥100 million )1

Infrastructure

STEPSTONE G INFRASTRUCTURE OPPORTUNITIES, L.P.

2,308

2

Infrastructure

GLOBAL ALTERNATIVE CO-INVESTMENT FUND I

1,547

3

Infrastructure

PANTHEON G INFRASTRUCTURE OPPORTUNITIES LP

1,013

4

Infrastructure

DG INFRASTRUCTURE, ILP

313

5

Infrastructure

DG INFRASTRUCTURE OPPORTUNITIES L.P.

270

1

Private Equity

GLOBAL ALTERNATIVE CO-INVESTMENT FUND II

185

1

Real Estate

CBRE GIP G REAL ESTATE INVESTMENTS, LP

2,409

2

Real Estate

MUTB G REAL ESTATE FUND

1,399

(Note 1) Security names are as of March 31, 2020.
(Note 2) Alternative assets listed above are those that were established by March 31, 2020.

88

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
associated with pension reserve management, and act with the highest professional ethics andintegrity to avoid any distrust or suspicion of the public.

【4】Duty of confidentiality and protecting GPIF’s assets◆ We shall strictly control confidential information that we come to access through our businesses,
such as non-public information related to investment policies and investment activities, and neveruse such information privately or illegally.
◆ We shall effectively use GPIF’s assets, both tangible and intangible (e.g., documents, proprietary
information, system, and know-how), and protect and manage such assets properly.

【5】Prohibition of pursuing interests other than those of GPIF
◆ We shall never use our occupations or positions for the interests of ourselves, relatives, or third
parties.
◆ We shall never seek undue profits at the expense of GPIF.

【6】Fairness of business transactions◆ We shall respect fair business practices at home and abroad, and treat all counterparties impartially.
◆ We shall never make transactions with anti-social forces or bodies.

【7】Appropriate information disclosure◆ We shall continue to improve our public information disclosure and public relations activities.
◆ We shall ensure the accuracy and appropriateness of our financial statements and other public
documents that are required to be disclosed by laws and ordinances.
◆ We shall remain mindful that our outside activities, regardless of whether business or private (e.g.,
publications, speeches, interviews, or use of social media) affect the credibility of GPIF, and act
accordingly.

【8】Developing human resources and respect in the workplace◆ We are committed to GPIF’s mission by improving our professional skills and expertise, promoting
communication and teamwork and nurturing a diversity of talents and capabilities.
◆ 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,
staff, or other related personnel, such activity shall be immediately reported to GPIF throughvarious channels including our whistleblowing system.
◆ When such a report is made, we shall conduct the necessary investigation and take corrective
actions and preventive measures according to our internal rules.

9

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