ANNUAL REPORTFISCAL YEAR 2020

Government Pension Investment Fund

Investment Principles

1

Our overarching goal is to contribute to the stability of the national pension
system by securing the investment returns that it requires with minimal risk andfrom a long-term perspective, to the sole benefit of pension recipients.
Our primary investment strategy is diversification by asset class, region, and2

timeframe. While market prices may fluctuate in the short term, GPIF will takefull advantage of our long-term investment horizon to achieve investment
returns in a more stable and efficient manner, while simultaneously ensuring
sufficient liquidity to pay pension benefits.
We formulate our overall policy asset mix and manage risks at the portfolio,

3

asset class, and investment manager level. We utilize both passive and active
management in order to achieve benchmark returns (i.e., average market
returns) and seek untapped profitable investment opportunities.

We believe that sustainable growth of investee companies and the capital market

4

as a whole are vital in enhancing long-term investment returns. In order to securesuch returns for pension beneficiaries, therefore, we promote the incorporationof non-financial environmental, social, and governance (ESG) factors into theinvestment process in addition to financial factors.

5

In order to enhance long-term investment returns and fulfill our stewardship
responsibilities, we shall advance various initiatives (including the considerationof ESG factors) that promote long-termism and the sustainable growth ofinvestee companies and the capital market as a whole.

1

Table of Contents
Investment Result Summary and Topics in Fiscal 2020

3

Message from the Chairperson of the Board of Governors

5

Message from the President

6

Introduction of GPIF

7

Overview of Fiscal 2020

17

Review on Fiscal 2020 Investment Activities

19

Chapter 1

Investment Results in Fiscal 2020

1 Investment Results21

2 Overview of Policy Asset Mix

30

3 Basic Policy of Portfolio Risk Management36

4 Status of Investment in Each Asset Class41

5 Investment in Alternative Assets

43

6 Stewardship Responsibilities

59

7 ESG Activities

68

8 Other Major Initiatives

75

Chapter 2

Roles and Organizational Operation of Government Pension
Investment Fund

1 GPIF’s Roles in the Public Pension Scheme

83

2 Organization and Internal Control System

87

Chapter 3

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc.

93

2 Factor Analysis of Excess Rate of Return100

3 Portfolio Holdings by Asset Category as of Mar. 31, 2021

102

Investment results of Government Pension Investment Fund, including this annual report, are available on the Fund’s website (https://www.gpif.go.jp/en/).
Please contact the Fund’s Planning and Communication Department (Tel: +81-3-3502-2486) prior to reproduction or reuse (except
quotation) of the content of this annual report for commercial purposes.
Please clearly cite the source when quoting, reproducing, or reusing any content of this report.

2

Investment Result Summary in Fiscal 2020

For details, refer to page 21-29

Since Fiscal 2001

Fiscal 2020

+25.15%+3.61%[annual rate]

Rate of return
Returns(Interest and dividend income)The excess rate of return(over the compound benchmark)+¥37,798.6[annual rate]+¥95,336.3[annual returns]

billion[annual returns][cumulative returns]

billion[cumulative returns](+¥3,012.8 billion)(+¥40,154.0 billion)

Fiscal 2020

Since Fiscal 2006

+0.32%-0.03%

As of the end of fiscal 2020

¥186,162.4 billion
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 2021¥

Foreign equities

24.89%¥47,818.0 billion

Domestic bonds

25%

(±7%)

Asset size

25%

(±7%)

25.92%¥49,807.8 billion

50% 50%(±11%) (±11%)

Domestic equities

25%

(±8%)

25%

(±6%)

24.58%¥47,227.3 billion

Foreign bonds

24.61%¥47,294.3 billion

Allocation changes for each asset class due to rebalancing
Allocated/withdrawn(Unit: ¥billion)

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities+3,716.0+9,837.1-3,002.4-10,009.1(Note) Each figure shows the net rebalancing amount.

Total fees

(The average fee rate on the
total investment assets)3¥61.1billion( 0.04%)

Topics in Fiscal 2020
1

Solid Investment Management Based on Policy Asset Mix

GPIF has adopted a new policy asset mix from fiscal 2020, and conducted its investment management including in-depth,
timely and flexible reviews of capital allocation and risk management in response to the highly volatile market. As a result,the annual rate of return for fiscal 2020 came to +25.15%, and the excess rate of return over the compound benchmark
recovered positive return (+0.32%) for the first time in virtually seven years.

2

Promoting ESG Activities

GPIF promotes ESG investments in order to reduce negative externalities such as environmental and social issues, and to
improve the sustainable return from the whole assets. In fiscal 2020, GPIF partially revised its Investment Principles to clarify
our underlying idea behind its ESG investments that sustainable growth of both investee companies and the overall capital
market is critical in order to enhance long-term investment returns for the benefit of the pension beneficiaries. GPIF selected
two ESG themed foreign equity indexes and began passive management based on the following two benchmarks.
General ESG MSCI ACWI ESG Universal Index
Diversity Morningstar Gender Diversity Index (“GenDi”)

For details, refer to page 68-74.

3

Alternative Investments to Gain Momentum

GPIF has steadily been increasing exposure to alternative investments (infrastructure, private equity, and real estate) in
expectation of greater portfolio diversification, seeking to improve investment efficiency and further to ensure the stability ofpension finance. In fiscal 2020, GPIF newly selected asset managers for the following two areas.
Private equity (Global-Diversified Strategy)
Real estate (Global-Core JV/Club Type Investments)

For details, refer to page 43-58.

4

Message from the Chairperson of the Board of Governors

The Board of Governors aims at making GPIF
trustworthy organization for the Japanese public by fully
utilizing the expertise of the Governors with a wide range ofknowledge and experiences.

The mission of GPIF is to manage pension reserves stably
and efficiently from a long-term perspective, solely for the
benefit of the public, thereby contributing to the stability ofpension finance.
The Board of Governors comprises ten members:
the President of GPIF and nine outside experts with abroad range of pertinent knowledge and experience.
The Board of Governors makes decisions on important
policies related to the management and investment ofpension reserves including the formulation of the policy
asset mix, and the management of the organization.
In addition, the Board of Governors supervises the
Executive Office’s business executions in cooperation
with the Audit Committee.
I was inducted as the Chairperson of the Board ofGovernors on April 1, 2021. I am committed to achieving
the mission of GPIF by fully utilizing my expertise in financeand the economy, and my organizational management
experience that I acquired so far in my career.
GPIF must always be a trustworthy organization for
the Japanese public. To this end, it is the most important
to ensure that the pension reserves are managed andinvested in an appropriate manner in accordance withthe mission of GPIF. After more than a year since the
COVID-19 infection started to spread globally, thepandemic has yet to be ceased. Even in such a difficult
socioeconomic environment, our mission remains
unchanged. The Board of Governors is committed to
devoting all of its energies for the benefit of the Japanesepublic by concentrating the wisdom of its members inclose collaboration with the Executive Office under theleadership of the President.
I would sincerely appreciate your continuous
understanding and support.
Chairperson of theBoard of Governors

5

UCHIDA Takakazu

ARAI Tomio

HORIE Sadayuki

KOMIYAMA Sakae

KATO Yasuyuki

YAMAGUCHI Hirohide

KOGA Nobuaki

NEMOTO Naoko

IWAMURA Shuji

MIYAZONO Masataka

YAMAGUCHI Hirohide

Government Pension Investment Fund, Japan

Message from the President

We pledge to continue fulfilling our mission of contributing to
the stability of the public pension finance and the stability of
the lives of Japanese public, by exercising fiduciary
responsibilities for the pension reserves.
The mandate of Government Pension Investment Fundis to contribute to the stability of the Employees’ Pension
Insurance and National Pension schemes by managing
and investing the pension reserves entrusted to us by the
Minister of Health, Labour and Welfare and by disbursing
investment returns into the Pension Special Account.
The investment return for fiscal 2020 was positive
due to the strong performance of equities in Japanand overseas.
In fiscal 2020, global stock markets rose significantly as
major countries implemented large-scale fiscal spending
to stimulate the economies and continued accommodative
monetary policies with the COVID-19 sweeping the world.
Long-term interest rates rose in the U.S. and to a lesser
extent in other major countries due to concerns over theincreased issuance of government bonds for the fiscal
spending and expectations for the resumption of economic
activities following the vaccination of the COVID-19. The
yen depreciated against the U.S. dollar and euro.

As a result of these developments, the annual rate of
return came to +25.15%. Bringing more than ¥95 trillion
cumulative amount of returns since fiscal 2001, when
GPIF started managing pension reserves. While, thereturns constantly fluctuate, GPIF is resolved to continue
to comply with the Investment Principles and the Code of
Conduct and fulfill its fiduciary duty so that it can set aside
the necessary amount of pension reserves for the public
pension scheme by managing assets from a long-term
perspective without being distracted by short-term market
fluctuations. In this annual report for fiscal 2020, we aim to
improve further transparency by adding new analysis andrelevant information, as we did in the previous year, so that
we can provide a clearer picture of our activities.
As is typified by a phrase “new normal”, the global
COVID-19 pandemic is drastically changing thesocioeconomic landscape. Having said that, however,by exercising fiduciary responsibilities for the pension
reserves, we pledge to fulfill our mission of contributing to
the stability of the public pension finance and the stabilityof the lives of Japanese public, as an organization worthyof the public’s trust.
I would sincerely appreciate your continued
understanding and support.

President
MIYAZONO Masataka

Government Pension Investment Fund, Japan

6

Introduction of GPIF

1. About GPIF
Introduction
Public pension scheme is designed to support
the future of Japan.
Here, we would like to explain the activities of GPIF which
is managing and investing a part of the public pension
funds, in simple and easy manners.

What is a public pension?
A public pension is a scheme in which all citizens pay premiums to support each other in order for each citizen
to prepare for potential risks in our lives, such as “becoming unable to work due to age”, “living with disabilities
resulting from illness or injury”, and “losing main income source of a family”. Particularly in Japan, the public
pension scheme plays a very important role as life-long support for elderly people.
For details of GPIF’s roles in the public pension scheme, refer to page 83-84.
(Note) The information is partly simplified for easy understandings. All the images in this section are for illustrative purposes only.

Will I get my contributions back aspension benefits in the future?

How will the pension system workas the population ages and thebirthrate declines?

The public pension scheme in Japan adapts theconcept of “intergenerational dependency”, whereby
pension benefits for elderly generations are paid frompension premiums collected from working
generations contemporary with the elderly
generations. Therefore, the scheme is not designed
to cover your pension benefits by your own premiums
accumulated in advance.

The pension system reflects changes in the times,
such as the growing number of employed elderly
people and women, to improve its sustainability. In
addition, the system is designed to stabilize pension
finance by utilizing pension reserves.

For details, refer to page 8.

What does GPIF do?

7

For details, refer to page 9.

Can the amount of benefits to be paid in
the next year be affected by this year’s
investment performance?

GPIF is an organization managing and investing
pension reserves to increase the source of pension
benefits for future generations.

What GPIF invests is the funds “reserved for future
generations”. Therefore, the amount of benefits tobe received in the next year will not be affected
regardless of whether the investment performancein this year is positive or not.

For details, refer to page 10.

For details, refer to page 10.

First, let’s walk throughJapan’s pension system.

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

Current
recipient
generation

Pensionbenefits

Pensionpremiums

Current
working
generation

Contributions

Pensionbenefits

Pensionpremiums

Futureworking
generation

Contributions

Under the public pension scheme in Japan, pension benefits for the elderly generations are paid bypension premiums collected from the contemporary working generations. In other words, pension
benefits to be received in the future by the current working generations will be covered by the pension
premiums paid in the future by generations of their children and grandchildren. The scheme is notdesigned to cover your pension benefits by your own premiums accumulated in advance.

What concerns do we have in the age of shrinking population in Japan?
8What would happen to the pension scheme as
as the population of Japan decreases?
If the decreasing birthrate and aging population continue, the burden
on future working generations would become too heavy.

Working generation

Recipient generation

Pensionpremiums

Pensionbenefits

Government
contribution

In a society with decreasing
birthrate and aging population...
Working population decreases

Recipient population increases

Shortage
supplemented
by pension
reserves

Pensionpremiums

Pensionbenefits

Government
contribution

In recent years, while the population of the original working generation has decreased, our society has shifted toallow people to work longer and in more diversified ways: e.g. the number of elderly employment increases as
people’s healthy lifespan becomes longer and the female employment rate is increasing. By reflecting thesechanges to the design of the scheme, the sustainability of the pension scheme has been improving. In addition,pension reserves are planned to be used to supplement the potential shortage of pension funds for future benefit
payments when necessary, to ensure the stability of pension finance over a period of time in the future.

We will go into the role of pension reserves in detail.
9

GPIF manages pension reserves
for future generations.
What are pension reserves?
Out of pension premiums contributed by the working generation, those unused for current pension
payments shall be reserved for future generations as pension reserves. In the long run, about 10
percent of the total pension funds is estimated to come from the pension reserves.

Secure funds throughinvestment returns

Role of the pension reserve

Pensionreserve

Covers deficit

Covers deficit

Pension payment
sources

SurplusPensionpremiums

Declinein working
generation

Pensionpremiums

Declinein working
generation

Pensionpremiums

Government
contribution

Government
contribution

Government
contribution

Present

50 years later

100 years laterLong-term plan

Will the next year’s pension payment be affected by theinvestment result of this year?
The pension reserve fund managed by GPIF is used to prevent the burden on future generations frombecoming too heavy. Therefore, even if the investment result of this year is positive, the amount ofpension benefit payment will not increase in the next year. Likewise, even if the investment result of
this year is negative, the amount of pension benefit payment will not be reduced in the next year.
102. About investmentsof the pension
reserves
To ensure stable earnings from its investments,
what GPIF keeps in mind are as follows.

GPIF employs long-term investment and diversified
investment as its principle investment strategies(1) GPIF carries out long-term investment.
Although investment performance in the short term can fluctuate in a large scale in either positive or
negative direction, as investment horizon becomes longer, the range of fluctuation is expected to besmaller, because positive results and negative results would be offset with each other in the long run.
The pension reserve fund managed by GPIF is projected not to be used for benefit payments for about
the next 50 years or so. Therefore, GPIF adopts a long-term investment strategy that aims to gain stable
returns by holding various types of assets over the long term without being too conscious about temporary
market fluctuations.

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)[Scenario III] Peak: FY2079¥¥479 trillion

Actual as of March 31, 2020¥

¥151trillion[Scenario II]
Peak: FY2088 (¥693 trillion)[Scenario III]
[Scenario IV]
Peak: FY2074 (¥300 trillion)[Scenario V]
Peak: FY2045 (¥234 trillion)

2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 2105 2110 (FY)
(Note) For details of Scenario I through Scenario V, refer to page 31.

11(2) GPIF carries out diversified investment.
In the asset management industry, there is a saying “Don’t put all your eggs into one basket.” GPIF aims toachieve stable returns by diversifying its investments in multiple types of assets diversified in nature andprice movements.
The amount of pension reserve fund managed by GPIF is huge, exceeding some ¥186 trillion. This
allows us to invest in a wide range of domestic and foreign assets, carefully taking into account thepotential market impacts of our investments.
Put all your eggs into one basket

All break

When something happens...

Divide them into multiple baskets

to diversify risks

We combine “long-term investment” and “diversified investment” to achieve stable returns.

12

GPIF is making Investment basedon the policy asset mix(the principle asset allocation policy)
It is commonly known that, in a long-term investment, maintaining portfolio (a policy asset mix) over thelong term yields a better result effectively, rather than changing the portfolio in response to short-term
market fluctuations.
At GPIF, pension reserves shall be managed in line with the principle asset allocation policy (the policy
asset mix) from a long-term perspective.
Current policy asset mix(Since April 2020)

Foreign equities

Domestic bonds

(±7%)

(±7%)

25%

25%

50
50
%% 50%(±11%)(±11%)(±11%)

Domestic equities

Foreign bonds

(±8%)

(±6%)

25%

25%

(Note) figures in parentheses indicate deviation limits.

However, when it comes to actual investment management, because the market conditions constantly
change, it is essential to establish a framework that enables timely and flexible allocation adjustments withinreasonably appropriate ranges, while principally following the policy asset mix.
Therefore, GPIF defines the ranges of allowable deviations from the policy asset mix (deviation limits).
Since long-term investment results shall be mostly attributable to a policy asset mix, we believe that thepolicy asset mix is the core of our pension reserve fund management and investment. When the asset
allocation ratios of actual investments deviate from that of the policy asset mix, GPIF timely and flexibly
executes rebalances in order to assure the actual allocations are within the deviation limits.

13

GPIF allocates its investments appropriately,
not only to bonds but also to equities
In recent years, the interest rate of 10-year Japanese government bonds has been around 0%. Under thecondition that the consumer price and wages are expected to rise as the economic and investment
environment change in the long run, it is difficult to secure the yields necessary for pension finance byinvesting mainly in domestic bonds.
Equities are exposed to greater price fluctuation risks than bonds in the short term, but could yield a higher
return from a longer perspective. At GPIF, we aim to secure the fruits of Japanese and foreign corporation’s
activities and the resulting economic growths in the form of “dividends” and “capital gains” by appropriately
incorporating equities in our portfolio in order to secure the necessary level of yield for pension finance at
the minimal risks.
(%)
8(%)
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
1995
-1
1995

(%)
8(%)
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
1995
-1
1995

10-years yields, US & Japan
10-years yields, US & Japan
US Government Bond 10-year yield
US Government
Bond 10-yearyield yield
Japanese
Government
Bond 10-year
Japanese Government Bond 10-year yield

2000
2000

2005
2005

2010
2010

2015
2015

2020
2020

Dividends yields, Japan & Global
Dividends yields, Japan & Global
TOPIX dividends yield
TOPIX
dividends
yield dividends yield
MSCI-ACWI
ex Japan
MSCI-ACWI ex Japan dividends yield

2000
2000

2005
2005

2010
2010

2015
2015

2020
2020

Would future withdrawals from the pension reserves (which leads todispositions of its equity holdings in the portfolio) negatively affectstock prices, given the vast amount of GPIF’s equity holdings?
The pension reserves managed by GPIF is projected not to be withdrawn for the next 50 years orso. (However, a part of the investment gains may be used for the payments of pension benefits).
Even after the withdrawals start in the future, the pension reserves shall be withdrawn
gradually over several decades, rather than at one time. GPIF shall pay necessary attention tominimize the potential market impacts of these dispositions associated with the withdrawals,
while carefully assessing market trends and conditions in Japan and foreign countries.

14

GPIF invests in various
types of assets not only in Japanbut also in foreign countries.
For instance, a temporary fall in asset prices due to market fluctuations could be offset by a subsequent
rebound, leaving the value of a portfolio unaffected in the long run. However, in some cases, a downward
trend of asset prices could continue longer than had been initially assumed. In other cases, on the contrary,
if the portfolio does not hold a specific asset whose price is on the rise, the portfolio would miss anopportunity of taking profit.
By investing in various types of assets not only in Japan but also in foreign countries, GPIF has conducted
its investment management with an aim to increase opportunities for profits generated from global economic
activities, and simultaneously to mitigate the risk of material losses thanks to the diversification effects.

Investment amount by country
Top 15 countries by amount invested as of the end of March 2021 are as follows.
United Kingdom (¥trillion)
Netherlands (¥trillion)

4.9

2.8

2.1

1.1

Germany (¥trillion)

0.9

2.0

4.2

Canada (¥trillion)

1.2

0.9

3.0

2.3

1.4

South Korea(¥trillion)
0.1

Belgium(¥trillion)
0.1

1.0

1.1
1.0

Switzerland (¥trillion)
0.1

Ireland(¥trillion)
0.5

1.2

Japan (¥trillion)

0.9

Bonds

1.4
1.4

40.2

China (¥trillion)
0.0

0.7

Total

86.7

Equities

46.4

2.1
2.1
United States (¥trillion)
France (¥trillion)
Spain

1.5

(¥trillion)

0.3

3.0
2.7

6.1
4.6

21.7

Italy (¥trillion)

0.3

4.5
4.3

Australia (¥trillion)
0.8

1.7

0.9

49.6
27.9

Is there any risk in investing in assets in foreign countries?
When it comes to investing in assets in a foreign country, as a result of interest rate andcurrency exchange rate fluctuations, the value of a foreign currency-denominated asset caneither increase or decrease when the asset invested is evaluated in JPY. An asset price may
also fluctuate due to other factors such as the currency situations, and political and economic
conditions of the country invested in.
GPIF diversifies its investment into various regions and currencies in order to mitigate pricefluctuations on the overall investment asset basis. GPIF has also taken appropriate measuresby monitoring domestic and foreign economic trends and conditions, etc. in a timely way.

15

Risks are controlled
appropriately to ensure
long-term profitability.
The word “risk” is used in the sense of “danger” or “probability that an unfavorable situation will occur” in
the Japanese language. However, in the field of investment management, the word “risk” generally means“fluctuations in return,” or the “range of change in return.”
Future return on equities and bonds is not fixed and certain. The following diagram shows fluctuations in
the return of both assets, suggesting that the greater the fluctuation, the higher the risk.
Annual return on Japan Equity and Japan Bonds from 1970 to 2020
Japan Equity

Japan Bonds

Fluctuations in return (risk)*The average fee rates against externally managed assets (annual rates) for each asset class are assumed to have been charged throughout
the entire simulation period.
Japan Equity: 0.02%,Japan Bonds: 0.01%, Foreign Equity: 0.04%, Foreign Bonds: 0.02%*No transaction costs in rebalancing nor taxes are assumed. Assumes reinvestments of interest income and dividend.
*Past performance is not a guarantee of future results.
<Source> Japan Equity: Tokyo Stock Exchange 1st section weighted average return of market capitalization, Foreign Equity: MSCI
Kokusai(Gross, Yen-base)
Japan Bonds: Nomura-BPI Overall, Foreign Bonds: Foreign Bond Portfolio constructed by Ibbotson Associates Japan before December
1984 and FTSE WGBI(ex-Japan, Yen-base) after January 1985.
Copyright ©2021 Ibbotson Associates Japan, Inc. All Rights Reserved.
This material includes proprietary materials of Ibbotson Associates Japan.
Any use, reproduction, etc., by any means, in whole or in part without prior written consent of Ibbotson Associates Japan is prohibited andis subject to liabilities for damages and penalties under copyright law.

It is legally prescribed that the purpose of investing the reserve funds is to contribute to the future stability ofthe public pension scheme through stable and efficient management from a long-term perspective. The
Medium-term Objectives prescribed by the Minister of Health Labour and Welfare (“MHLW”) stipulate that apension reserve fund must achieve a long–term real return (net investment yield on the pension reserve fundless the nominal wage growth rate) of 1.7% with minimal risks.
A risk emphasized by GPIF is not “short-term fluctuations in returns due to temporary market fluctuations.”
but “a risk of failing to achieve a long-term investment return required for the pension finance”. GPIF is
conducting its investment management with an aim to mitigate the risk of failing to achieve the long-term
investment return, while professionally analyzing various indicators and taking into consideration short-term
fluctuations in returns due to temporary market fluctuations.
Pension reserves (¥trillion)

1,500
1,200

Above long-term
investment objectives(planned reserves)

75th percentile

900

Median600

Planned reserves

300
0
2020

25th percentile

2025

2030

2035

2040

2045

2050

2055

2060

2065(FY End)

Below long-term
investment objectives(planned reserves)= Long-term risks

16Overview of Fiscal 2020
Investment Results

For details, refer to page 21-22.

Since Fiscal 2001

Fiscal 2020

+25.15%+3.61%[annual rate]

Rate of return[annual rate][annual returns][cumulative returns](+¥37,798.6 billion)(Returns)(+¥95,336.3 billion)

As of the end of fiscal 2020

¥186,162.4 billion¥
Asset size

(Note) Rate of return and returns are marked to market as of the end of fiscal 2020, and include unrealized gains and losses.

GPIF manages pension reserve fund with long-term perspective. While short-term portfolio returns are influenced by thecurrent market trends, investment results should be monitored with long-term horizon.
Regarding investment of pension reserves, while market fluctuations may cause capital losses (realized and unrealized
losses due to price fluctuations) in the short term, investment income (interest and dividend income) is relatively immune tosuch volatility and has increased steadily since fiscal 2001.

Cumulative returns since fiscal 2001(¥billion)

95,336.3

100,000

63,441.3

50,733.8

40,00025,220.9
17,370.3

20,00013,425.8537.8

1,189.6-587.4-3,040.5

02,021.1
1,851.1

4,463.8

4,474.9

11,852.5 10,315.7
6,115.5

12,509.4
11,689.3

14,602.6

20,751.8

16,636.7

11,389.4

13,998.6

53,360.3

57,537.7

45,423.9

35,441.5

23,005.0

65,820.8

25,547.4

28,080.830,859.7

33,900.6

37,141.2

40,154.0

18,610.7

8,116.4
3,127.0

2,504.3-20,000
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

17

Investment income

60,000Capital gains

80,000Overview of Fiscal 2020

Contribution to Public Pension FinanceFor details, refer to page 23.

(cumulative)

3.78%[annual rate]

Real return on
investment for thewhole pension reserves

Under the Medium-term Objectives established by the Minister of Health, Labour and Welfare (MHLW), the investment target
for the whole pension reserves (Note1) is to secure a long-term real return (net investment yield on the pension reserve fundless the nominal wage growth rate) of 1.7% with minimal risks. (Please note that this investment target is on long-termbasis, so not required to be achieved each year in the period.)(Note 1) The whole pension reserves include pension reserve fund managed by GPIF and fund managed by the Pension Special Account.
(Note 2) The amount of public pension benefits is designed to increase roughly in tandem with the nominal wage growth rate in the long run. Therefore,
investment return for the whole pension reserves that exceeds the contribution from the nominal wage growth rate is the real investment return in thesense that it contributes positively to pension finance. Accordingly, an evaluation of the impact of investment results on pension finance shall be carriedout on the basis of “the actual rate of investment return,” which is the rate of investment return (nominal investment return) for the whole pension
reserves minus the nominal wage growth rate.

For the roles of pension reserve fund in pension finance, refer to page 83-84.

Real return for the whole pension reserves on investment (cumulative) since fiscal 2001
(%)

10.0
8.0

Investment results for the whole pension reserves(cumulative yield from fiscal 2001 to the end of each fiscal year [annual rate])

6.0

3.78% (FY2020)

4.0
2.0
0.0
-2.0

Long-term investment targets
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020(Note 1) Real investment return is calculated as {(1 + nominal investment return / 100) / (1 + nominal wage growth rate / 100)} × 100 - 100.
(Note 2) Nominal investment return is the rate of return after investment management fees, etc. (the figures include interest expenses on borrowings in the
succeeded fund investment account up to fiscal 2010), calculated by the following formula: the amount of return for the whole pension reserves divided
by the average balance of investment principals for the whole pension reserves “{Assets at the end of the previous fiscal year + (Assets minus return atthe end of the current fiscal year)}/2”.
(Note 3) 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 thenominal wage growth rate, respectively.
(Note 4) Figures represent the geometric mean of cumulative yield from fiscal 2001 to the end of each fiscal year (annualized).

18

Review on Fiscal 2020 Investment Activities

In fiscal 2020, as the opportunities to review the asset

additional ¥1.6 trillion to active funds of foreign bonds. In

allocation increased amid dramatic market fluctuations,terms of liquidity, after recalculating the necessary liquidity

GPIF gained a lot of positive experience that may bebased on past stress test results, etc., we decided tobeneficial to the investment in line with the policy

abolish the fund that supports cash outflows (about ¥8.7

asset mix.

trillion in balance), cut short-term assets drastically

GPIF entered into the first year of its fourth Mediumterm Plan under the market conditions where thefunds in the amount of about ¥1 trillion. This allowed us tovolatilities of all asset types remained high (pricerealize full investment of the portfolio (to reduce non-fluctuations were quite large), reflected by a huge drop ininvested excess cash to the lowest possible level).

the Nikkei Stock Average by almost 20% in the two

Later, although the stock markets clearly saw amonths from February to March 2020 due to therecovery trend, the market volatility remained at a relatively

COVID-19 pandemic. GPIF simultaneously adopted its

high level, with an estimated tracking error of about 100

new policy asset mix which increased the foreign bondbp (the value of the variability of deviation of the excess

allocation in the portfolio of the overall assets by 10%

rate of return one year later at certain point of time is 100(from 15% to 25%).

bp under one deviation, meaning that the excess rate of

In addition, at the beginning of the fiscal year, we werereturn is expected to be within the variability of ±1% with arequired to manage a part of pension reserves repayment

probability of about 68%. 1 bp (basis point) stands forrequest to the Special Pension Account.

0.01%). Therefore, in order to make the rate of investment

Accordingly, in the first half of the fiscal year, the19(decrease of about ¥2.8 trillion), and redeemed bailed

return of GPIF’s portfolio close to the compound

investment of our portfolio placed an emphasis on (1) fundbenchmark return of the policy asset mix, we worked toallocation to devalued risk assets, (2) fund allocation to

reduce risks within all four types of assets, in addition toforeign bonds in association with the change in the policy

revising asset allocation to foreign bonds as a result ofasset mix, (3) assessment of the amount of necessary

adopting a new policy mix. As for foreign bonds, we

liquidity for the purpose of the repayment of a part ofmassively adjusted the ratios of U.S. dollar-denominatedpension reserves to Special Pension Account, thebonds, euro-denominated bonds, and UK pound-

payment to the national treasury, and the security ofdenominated bonds worth some trillion yen. For domestic

rebalancing funds needed to respond to dramatic market

equities, we cancelled four smart beta funds (worth about

movements, etc., and (4) fund management in line with the¥2.9 trillion in total) to reduce investment style risk.

policy asset mix under highly volatile market conditions.

Later in fiscal 2020, a sharp recovery in the prices of

For this reason, we raised the ratio of equities in therisk assets including equities looked more likely, and theportfolio that had deteriorated due to worsened market

Nikkei Stock Average, which temporarily fell below

conditions to nearly 50%, and then purchased foreign¥17,000 in March 2020, rose by more than ¥10,000 at thecorporate bonds to increase risk assets by allocating an

end of December in the same year. As GPIF’s portfolio

Review on Fiscal 2020 Investment Activities

allocation on equities also increased along with the rising

trillion, whereas it newly selected five active funds ofmarket, we sold domestic and foreign equities from a risk

domestic equities for the first time in six years, and also

management point of view. As a result of the above, theimplemented a procedure to select new active funds ofrate of investment return in fiscal 2020 exceeded +25%

domestic bonds for the first time in eight years. The(gross profit after deducting expenses was about ¥37.7

market capitalization of alternative assets increased bytrillion), after recording -5.2% in fiscal 2019 due to theabout ¥400 billion. Although the COVID-19 pandemic

COVID-19 pandemic. In addition, for the first time in sevenaffected certain sectors, the impact on the return of theyears the excess returns were more than ¥400 billion (+32

overall alternative assets was immaterial throughout thebp) compared with the policy asset mix. More than ¥13

fiscal year thanks to an investment diversification effecttrillion of domestic and foreign equities in total was sold inand a subsequent market recovery. In recent years, as the

fiscal 2020 to reduce risk, and the maximum variability ofinvestor base has been expanding and the size of funds

the excess rate of return per day declined to one-fourth ofraised has been at high levels, competition to seek qualitythat of the first quarter, improving the risk and return of the

projects that meet investors’ expectations has intensified.

portfolio dramatically.

It will become even more essential to select a fundThe cumulative rate of investment return over 20 years
from fiscal 2001 to fiscal 2020 was +3.61% (a cumulative
return of approximately ¥95 trillion). The cumulative return(manager) that can acquire quality projects and provide
high returns even under such conditions.
In terms of fees, GPIF made adjustment to asset

for the period from October 2014, when the equity

management fees (including certain fees that are deducted

allocation ratio of the policy asset mix was revised to 50%,

from the entrusted assets, such as custody fees andto fiscal 2020 was about ¥54 trillion.

attorney fees) related to foreign assets, and succeeded in

Based on the above, although the portfolio held by
GPIF is affected by market events in the short term, it ishighly likely that the portfolio will achieve the target wage
growth rate of +1.7% in the long term.
As for ESG investment, GPIF newly adopted two ESG

substantially reducing the asset management fees fromfiscal 2021.
Regarding investment and management of pension
reserve fund, GPIF will strive continually to implement
highly transparent risk management and achieve theindexes for foreign equity in fiscal 2020 to promote

targets of the fourth Medium-term Plan. I would sincerely

investing in green bonds and COVID-19 bonds. As aappreciate the continued understanding and support ofresult, the amount of ESG investment in a narrow sense,

the public including the pension beneficiaries.

the sum of ESG indexes-based equity passive investment
and bond investment (including green bonds), was about¥11.8 trillion in total.
In addition, GPIF decided to cancel eight lowperforming active funds with an asset size of about ¥2.7

Executive Managing Director (Management andInvestment Operations)/CIO

UEDA Eiji

20

Chapter 1 Investment Results in Fiscal 2020
1

Investment Results[1] Rate of investment return / Amount of investment returns, etc.
Rate of investment return / Amount of investment returns
The rate of investment return for fiscal 2020 is

The amount of investment returns for fiscal 2020 is+25.15%+¥37,798.6 billion

.

1Q
Total

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

.

2Q

3Q

4Q

Total

8.29%

3.03%

6.18%

5.65%

25.15%¥12,486.8 billion¥4,923.7 billion¥10,352.8 billion¥10,035.2 billion¥37,798.6 billion-0.45%

0.18%

0.02%

-0.44%-0.68%-¥183.0 billion¥79.6 billion¥11.5 billion-¥147.9 billion-¥239.8 billion

3.45%

0.64%

1.21%

1.60%

7.06%

¥1,186.5 billion¥208.0 billion¥524.0 billion¥755.3 billion¥2,673.8 billion

10.95%

4.93%

11.27%

9.26%

41.55%¥3,968.9 billion¥1,959.9 billion¥4,651.7 billion¥4,118.4 billion¥14,698.9 billion

19.99%

5.99%

11.88%

12.04%

59.42%¥7,514.4 billion¥2,676.3 billion¥5,165.6 billion¥5,309.5 billion¥20,665.8 billion(Note 1) Calculating the rate of investment return
The rate of return within total assets and each asset class is time-weighted, and is gross of fees (the same shall apply hereinafter).
(Note 2) Classification of FILP bonds
FILP bonds are government bonds issued to finance the Fiscal Investment and Loan Program (FILP).
Total and Domestic bonds include FILP bonds. JPY hedged foreign bonds and yen-denominated short-term assets are classified as Domestic bonds,
and foreign currency-denominated short-term assets are classified as Foreign bonds.
FILP bonds were reclassified as trading securities from held-to-maturity securities as of the end of January 2021. However, the rate of investment returnon FILP bonds has been calculated as time-weighted on a market value basis since April 2020, as is the case with other asset classes.
The amount of investment returns was evaluated, pursuant to the accounting standards for incorporated administrative agencies, on a purchase pricebasis (or a price calculated using an amortized cost method when there is a gap between the subscription price and the face value) until the end ofJanuary 2021, by which FILP bonds had been classified as held-to-maturity securities. Since the reclassification to trading securities in February 2021, it
has been evaluated on a market value basis until disposal.
(Note 3) Calculating investment returns
Investment returns are gross of fees.
(Note 4) Alternative assets
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).
The rate of time-weighted investment return on total alternative assets for fiscal 2020 is 6.55% (infrastructure at 5.71%, private equity at 4.44%, and realestate at 7.95%).
(Note 5) Other
Due to rounding off, the sum of each item in individual quarters does not necessarily match the total number for the fiscal year.
Fiscal 2020 runs from April 1, 2020 to March 31, 2021.

21

Cumulative returns and asset size since fiscal 2001
Cumulative returns from fiscal 2001 to fiscal 2020 are
Chapter 1+¥95,336.3 billion
and the value of investment assets at the end of fiscal 2020 is¥186,162.4 billion.

Cumulative return(¥billion)+95,336.3

100,000
90,00080,00070,000+63,441.3

60,000+50,733.8

50,000+35,441.5

40,000+45,423.9+17,370.3+13,425.8+11,852.5 +11,689.3 +13,998.6+2,504.3+4,463.8+11,389.4+1,851.1

20,00010,0000+57,537.7+25,220.9

30,000–10,000+53,360.3+65,820.8-587.4 -3,040.5
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Asset size(¥billion)

200,000

186,162.4

Market investments

180,000

FILP bonds

156,383.2 159,215.4

160,000
140,000
120,000

114,527.8

113,611.2

120,465.3

126,577.1

150,633.2

102,871.4

100,000

87,227.8

80,00070,341.1

60,00040,000119,886.8 117,628.6 122,842.5 116,317.0

137,476.9 134,747.5

144,903.4

50,214.3
38,601.4

20,0000

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020(Note) The balance of FILP bonds increased from fiscal 2001 to fiscal 2007 due to underwriting. There were no outstanding FILP bonds as of the end of
fiscal 2020 due to redemption on maturity since fiscal 2008.

22

Investment Results in Fiscal 2020

1 Investment Results

Comparison to long-term investment targets“The average real investment return (Note2)” for theLong-term investment targets

whole pension reserves

after fiscal 2015 are(Note1)

is

3.78%

+1.7%

for the 20 years since fiscal 2001.

above the nominal wage growth rate.

The average real investment return is higher than the long-term investment targets.
For the roles of pension reserve fund in pension finance, refer to page 83-84.
(Note 1) The whole pension reserves include pension reserve fund managed by GPIF and fund managed by the Pension Special Account.
(Note 2) The amount of public pension benefits is designed to increase roughly in tandem with the nominal wage growth rate in the long run. Therefore, investment
return for the whole pension reserves that exceeds the contribution from the nominal wage growth rate is the real investment return in the sense that it
contributes positively to pension finance. The 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, andare 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 for the whole pension reserves on investment (cumulative) since fiscal 2001
(%)

10.0

Investment results for the whole pension reserves(cumulative yield from fiscal 2001 to theend of each fiscal year [annual rate])

8.0

3.78% (FY2020)

6.0
4.0
2.0
0.0
-2.0

Long-term investment targets
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020(Note 1) Real investment return is calculated as {(1 + nominal investment return / 100) / (1 + nominal wage growth rate / 100)} × 100 - 100.
(Note 2) Nominal investment return is the rate of return after investment management fees, etc. (the figures include interest expenses on borrowings in the
succeeded fund investment account up to fiscal 2010), calculated by the following formula: the amount of return for the whole pension reserves divided by
the average balance of investment principals for the whole pension reserves “{Assets at the end of the previous fiscal year + (Assets minus return at theend of the current fiscal year)}/2”.
(Note 3) 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 thenominal wage growth rate, respectively.
(Note 4) Figures represent the geometric mean of cumulative yield from fiscal 2001 to the end of each fiscal year (annualized).

Performance

Investment performance for the whole pension reserves

23

FY2002

FY2003

FY2004

FY2005Nominal investment return

1.94

0.17

4.90

2.73

6.83

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

2.22

3.09 –3.46 –6.62 12.09 –0.93

1.34

5.18

2.94

7.01

FY2006

FY2007

FY2008(Unit:%)

FY2001

3.10 –3.53 –6.86

FY2009FY2010FY2011FY2012

7.54 –0.26

2.17

0.68 –0.21
2.39

FY2013

FY2014FY2020Last 20 years(annualized)

6.52

1.43 –5.00 23.98

3.64

0.03

0.41

0.95

0.70 –0.51

–0.13

5.45

6.09

0.48 –5.66 24.62

3.78

FY2015FY2016FY2017

9.56

8.23 11.62 –3.64

5.48

0.21

0.13

0.50

9.33

8.09 10.53 –4.12

0.99

FY2018FY2019Investment Results in Fiscal 2020

1 Investment Results

Investment income

Chapter 1

Returns on investment assets are valued at market prices and can be classified into investment income (interest anddividend income) and capital gains and losses (realized and unrealized gains or losses due to price fluctuations).
The breakdown of investment income shows that investment income from domestic and foreign equities has been
increasing while that from domestic bonds has been decreasing in recent years. Immediately after the start ofmanaging the pension reserves, domestic bonds accounted for 60% to 70% of investment income, although those
have recently declined to below 20%, while domestic and foreign equities account for about 60%. This is due to thefact in recent years that (i) the bond yields have fallen significantly, falling well below the equity dividend yields; and (ii)
GPIF has lowered the allocation of bonds and raised the allocation of equities in the policy asset mix since fiscal 2014.
Because long-term investors are allowed to enjoy greater compounding effects over time by reinvesting
investment income, GPIF reinvests investment income from the assets held, instead of holding them in cash.
In fiscal 2020, the total amount of investment income is¥3,012.8 billion (rate of return: +1.62%),
and the cumulative amount of investment income for the 20 years since fiscal 2001, when GPIF started managing
pension reserves, is¥40,154.0 billion (rate of return: +1.64% [annual rate])accounting more than 40% of the cumulative returns.

Cumulative returns and investment income since fiscal 2001(¥billion)

100,000

95,336.3

Cumulative returns
80,00063,441.3
60,00050,733.8

53,360.3

65,820.8

57,537.7

40,154.0

45,423.9

40,00035,441.5

33,900.6
37,141.2
30,859.7

25,220.9

20,000025,547.4
28,080.8
20,751.8
16,636.7
17,370.3
23,005.0
14,602.6
13,425.8
11,852.5
18,610.7
12,509.4
10,315.7
Investment income
13,998.6
6,115.5
4,463.8
11,389.4
4,474.9(cumulative)
11,689.3
2,021.1
8,116.4
537.8 1,189.6-587.4–20,000

1,851.1 3,127.0-3,040.5

2,504.3

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

24

Investment Results in Fiscal 2020

1 Investment Results

Investment income(¥billion)

(%)

3,500

2.50
Foreign equities

3,250

2.15%

Domestic equities
Foreign bonds

1.91%

Domestic bonds

3,000

1.78%

2,750

1.79%

1.80%

1.75%

1.79%

1.67%

1.64%

1.69%

1.64%

1.30%
1.18%

1,750

1.27%

1,500
210.6

1,000
107.2
99.2
69.6
64.4 135.7
77.8

750
45.4
44.7
54.4

500

0

308.8

390.5

162.2

165.3

123.9

247.7

318.3

210.2

234.3

266.3

753.4

1.50

530.0

438.1
360.4

303.2
401.4

398.3

324.8

353.1

982.0
907.0

366.6

445.7

607.5

684.3

946.8

782.4

1.00

331.1

399.5

320.0

383.8

420.4

338.5

490.4
1,225.7

1,255.9

1,038.4
720.8

323.5

976.1

266.0

244.1

192.8

626.3
439.0

301.1
292.4

263.7

1,250

250

771.4

1.43%
1.31%

2.00

846.2

869.9

2,250
1.39%

1,038.2

1.89%

1.87%

2,500

2,000

1.62%

Investment income

1,180.9

827.5

517.8

628.2

818.9

719.8

892.3

0.50
1,076.1

968.3

952.4

855.1

672.3

488.5

577.9

498.4

438.9

402.0

327.5

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

0.00(Unit: ¥billion)

Cumulative

Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities

14,962.4

Total

40,154.0

FY2001

FY2007

FY2008FY2009FY20101,180.9(1.03%)(1.10%)(1.12%)

827.5

1,038.4

1,225.7

1,255.9

8,122.0

54.4

77.8

135.7

192.8

247.7

338.5

399.5

398.3

401.4

8,068.8(1.66%)

8,986.3(2.20%)

44.7(0.65%)

45.4(1.19%)

537.8

64.4

(0.87%)

69.6(1.56%)

651.8

99.2

(0.83%)

107.2(3.33%)

123.9(1.00%)

162.2

720.8

FY2006(1.03%)(3.43%)

626.3

FY2005(1.26%)(3.06%)

488.5

FY2004(1.49%)(4.04%)

439.0

FY2003(1.24%)(3.12%)

390.5

FY2002(3.28%)

165.3(0.87%)

210.6(3.73%)

210.2(1.10%)

263.7(1.21%)(4.13%)

244.1(1.77%)

318.3(1.41%)(3.98%)

266.3(2.34%)

308.8(1.51%)

234.3
301.1

(1.96%)(2.09%)(2.92%)(3.40%)(2.27%)(2.23%)

2,093.2

831.4

1,106.0

1,347.9

1,640.7

2,000.8

2,199.4

2,193.7

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020(1.27%)(1.31%)(1.43%)(1.67%)

Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities

1,076.1(2.48%)(2.42%)(2.22%)(1.76%)(2.48%)(2.16%)(2.25%)(2.33%)

Total

2,034.1

1,973.9

2,141.1

2,253.2

2,542.4

2,533.4

2,778.9

331.1(3.33%)

303.2(2.14%)

323.5(1.79%)

320.0(2.71%)

324.8(1.85%)

360.4(1.64%)

952.4
383.8

(2.74%)

366.6(1.76%)

438.1(1.69%)

292.4(1.99%)(1.18%)(1.36%)

266.0(1.98%)(1.81%)(1.30%)

968.3(3.75%)(1.59%)(1.39%)(1.30%)

353.1(3.96%)(1.64%)(1.50%)(1.52%)

855.1(1.51%)

420.4(2.31%)

445.7(1.41%)

530.0(1.64%)

672.3(1.27%)

490.4(2.59%)

607.5(1.99%)

771.4(1.89%)

577.9(1.21%)

517.8(2.63%)

684.3(1.95%)

753.4(1.75%)

498.4(1.12%)

628.2(2.63%)

782.4(1.92%)

869.9(1.78%)

438.9(1.02%)

719.8(2.59%)

907.0(1.87%)

402.0(1.08%)

818.9(2.25%)

982.0(1.79%)

327.5(0.75%)

892.3(1.89%)

946.8(2.35%)(2.76%)

976.1

1,038.2(2.79%)(1.77%)

3,040.9

3,240.6

3,012.8(1.91%)(2.15%)(1.80%)(2.00%)

846.2(1.62%)(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) For fiscal 2020, the investment income of domestic bonds includes investment income from FILP bonds, as well as investment income from JPY hedged
foreign bonds and yen-denominated short-term assets, and the figures of foreign bonds include investment income from foreign currency-denominatedshort-term assets.
(Note 4) The annual rate of return (cumulative) represents the geometric mean of the rates of return for individual fiscal years (annualized).

25

Investment Results in Fiscal 2020

1 Investment Results

Factor analysis of difference from compound benchmark return
against a compoundbenchmark return ofrepresenting an excess rate of returnamounting to25.15%

24.83% +0.32%

The average of the annual rate of
return for the 15 years since the
GPIF’s establishment in fiscal 2006 on
all investment assets waswhile the compoundbenchmark rate of returnwas

The excess rate of return was

3.86%

3.89%

–0.03%

Chapter 1

In fiscal 2020, the total rate of returnon all investment assets came toreturned to positive for the first time in virtually seven years.

.

The “compound benchmark return”, representing the benchmark return rate for the overall assets (including domestic bonds,
foreign bonds, domestic equities, and foreign equities), is used as a standard to evaluate the investment performance of theoverall assets managed by GPIF. The “compound benchmark return” is expressed in terms of an annualized rate calculatedon the basis of the “compound benchmark rate return (monthly basis)”, which was obtained by weight-averaging thebenchmark rates of return on individual assets according to the shares in the policy asset mix (domestic bonds: 25%; foreign
bonds: 25%; domestic equities: 25%; foreign equities: 25%).
Factor analysis of the difference from the compound benchmark return in fiscal 2020
Rate of return

Total
Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities(Unit: %)Factor analysis of excess rate of returnAsset
allocation
factorBenchmarkfactorFund factor

+0.32

+0.15

-0.17

+0.37

-0.03

+0.32

-0.70

+0.02

-0.10

-0.02

+0.02

+0.00

-0.10

+7.06

+5.43

+1.63

+0.13

+0.06

+0.42

-0.02

+0.58

+41.55+42.13

-0.59

-0.14

-0.17

+0.04

+0.00

-0.26

+59.42+60.21

-0.79

+0.26

-0.05

-0.11

-0.01

+0.10

Return of
GPIF

Benchmarkreturn

Excess rate of
return—+25.15+24.83-0.68

Other factors(including
error)+ + +(Note 1) Domestic bonds include FILP bonds. JPY hedged foreign bonds and yen-denominated short-term assets are classified as Domestic bonds, and foreign
currency-denominated short-term assets are classified as Foreign bonds.
(Note 2) “Asset allocation factor” refers to a factor resulting from differences between the actual asset mix and the policy asset mix. “Benchmark factor” refers to afactor resulting from differences in rates of return between the policy benchmark and the manager benchmarks, for each asset class. “Fund factor” refers
to a factor resulting from differences in rates of return between individual funds and manager benchmarks. For the policy benchmark on each asset class,refer to page 32.
(Note 3) The contribution to the excess rate of return by the overall alternative investments is -0.12%. For details of investment in alternative assets, refer to page
43-58.
(Note 4) While the rate of investment return of GPIF is after taxes on both interest payments on foreign bonds and dividends on foreign equities, the benchmark
return is before taxes. Therefore, the excess rates of return are negatively affected by differences in taxes treatments in these two calculations.

Excess rate of return on overall assets
FY2006−FY2020 (the average of the annual rate of return since the GPIF’s establishment)(Unit: %)Rate of return

FY2006−FY2020

Return of GPIF

Benchmark return

Excess rate of return
—

3.86

3.89

-0.03

26

Investment Results in Fiscal 2020

1 Investment Results

FY2011−FY2020(Unit: %)Rate of return
Return of GPIF

Benchmark return

Excess rate of return-

FY2011

2.32

2.59

-0.27

FY2012

10.23

9.00

+1.24

FY2013

8.64

7.74

+0.90

FY2014

12.27

13.83

-1.56

FY2015

-3.81

-3.81

+0.00

FY2016

5.86

6.22

-0.37

FY2017

6.90

7.26

-0.37

FY2018

1.52

1.92

-0.40

FY2019

-5.20

-4.94

-0.25

FY2020

25.15

24.83

+0.32

(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, an analysis was conducted on the difference between the rate of return (time-weighted rate of return) on the funds invested
in the markets (hereinafter “market investment”) and the compound benchmark return rate. From fiscal 2008 to fiscal 2019, an analysis has been conductedon the difference between the rate of return on overall invested assets (market investment and investments in Fiscal Investment and Loan Program (FILP)
Bonds) (modified total return rate) and the compound benchmark return rate. For fiscal 2020, an analysis has been conducted on the difference between therate of return on overall invested assets (market investment and investments in FILP bonds) (time-weighted rate of return) and the compound benchmark
return rate.

27

Investment Results in Fiscal 2020

1 Investment Results

Investment assets and portfolio allocation(Pension reserves managed by GPIF and the Pension Special Account)

Domestic bonds

Foreign equities

24.89%¥47,818.0 billion

25%

(±7%)

25%

Chapter 1

Inside: policy asset mix (figures in parentheses indicate deviation limits)
Outside: at the end of March 2021

25.92%¥49,807.8 billion(±7%)

50% 50%(±11%)

25%
Domestic equities(±8%)(±11%)

25%(±6%)

Foreign bonds

24.61%¥47,294.3 billion

24.58%¥47,227.3 billion

Market value(¥billion)

Allocation of
Pension Reserve (1)Domestic bonds

49,807.8

25.92%

Foreign bonds

47,294.3

24.61%

Domestic equities

47,227.3

24.58%

Foreign equities

47,818.0

24.89%

Total

192,147.3

100.00%

Allocation of
Pension Reserve (2)50.54%
49.46%
100.00%(Note 1) The figures above are rounded off, so the sum of each item does not necessarily match the total number.
(Note 2) The amounts in the Market value column include accrued income and accrued expenses.
(Note 3) While the pension reserve as a whole includes reserves managed under the pension special account as of the end of fiscal 2020 (about ¥6.0 trillion), thisamount is prior to the adjustment for revenues and expenditures and differs from the amount in the final settlement of accounts.
(Note 4) JPY hedged foreign bonds and yen-denominated short-term assets are classified as Domestic bonds, and foreign currency-denominated short-term
assets are classified as Foreign bonds.
(Note 5) The percentage of the alternative investments: 0.70% (within maximum 5% of total portfolio)

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

Allocated/
withdrawn

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities+3,716.0+9,837.1-3,002.4-10,009.1(Note) Each figure shows the net rebalancing amount.

28

Investment Results in Fiscal 2020

1 Investment Results

Management and custodian fees

¥61.1 billion
0.04%

In fiscal 2020, total fees were.

The average fee rate on the total
investment assets for fiscal 2020 was.

Total fees increased by ¥29.2 billion from the previous fiscal year. The increase was attributable to many active asset
managers who earned an excess return.

(%)

70.0

0.10

Management and custodian fees

61.1

Management and custodian fees

60.0

Average fee rate against investment assets

0.08

48.7

50.0

38.3

40.0
30.0
20.0

23.1

22.2

0.02

0.02

25.3
0.02

0.09

0.07

40.0

0.06

29.5

29.1
0.03

0.03

31.9

0.04

0.04

0.03

0.02

0.05

0.02

0.03

0.02

0.02
10.0
0

0.01

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020Management and custodian fees by asset class
Total
Domestic bonds
Foreign bonds
Domestic equities
Foreign equities
Alternative assets

Average fee rate against investment assets

Management and custodian fees(¥billion)

0.00(Unit: ¥billion)

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

23.1
6.4
5.2
6.2
5.3
—

22.2
4.7
5.7
5.9
6.0
—

25.3
3.6
6.8
7.8
7.2
—

29.1
3.8
8.5
5.7
11.2
—

38.3
3.8
9.1
8.3
17.0
—

40.0
3.9
12.5
8.8
14.9
0.0

48.7
4.0
17.2
10.6
16.9
0.0

29.5
1.6
9.2
7.5
10.7
0.3

31.9
2.0
7.1
6.5
15.5
0.7

61.1
3.0
25.4
12.7
18.8
1.0

(Note 1) Management and custodian fees are rounded off to the nearest ¥100 million.
(Note 2) The total includes fees related to short-term assets and index licensing fees.
(Note 3) Fees paid to custodians exclude certain fees that are deducted from the entrusted assets, such as custody fees and attorney fees.
(Note 4) Foreign bonds include JPY hedged foreign bonds.

Average fee rate against externally managed assets
Total
Domestic bonds
Foreign bonds
Domestic equities
Foreign equities
Alternative assets
Average balance(¥trillion)(Unit: %)FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

0.02
0.01
0.06
0.05
0.04
—

0.02
0.01
0.06
0.04
0.04
—

0.02
0.01
0.05
0.04
0.04
—

0.02
0.01
0.05
0.02
0.05
—

0.03
0.02
0.05
0.03
0.05
—

0.03
0.03
0.07
0.03
0.05
—

0.03
0.03
0.08
0.03
0.04
0.14

0.02
0.01
0.04
0.02
0.03
0.23

0.02
0.01
0.02
0.02
0.04
0.14

0.04
0.02
0.06
0.03
0.04
0.11

112.0

111.5

123.9

131.9

139.0

137.3

155.7

158.9

161.4

170.2

(Note 1) Total includes in-house investment assets and index licensing fees.
(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.
(Note 3) Foreign bonds include JPY hedged foreign bonds.

29

Investment Results in Fiscal 2020

2

2 Overview of the Policy Asset Mix

Overview of the Policy Asset Mix

GPIF establishes the policy asset mix formed by the target
allocation to each asset class, and manages portfolio within
deviation limits.
The current policy asset mix, which started in April
2020, shall meet the investment objectives, a real
investment return (net investment yields on the pension
reserve fund less the nominal wage growth rate) of 1.7%
with minimal risks. In addition to the four deviation limits set

for each asset class, new deviation limits for total bonds
and total equities have been established in order tostrengthen risk management on the equities.

Chapter 1[1] Current policy asset mix(Note) For details of the current policy asset mix and previous policy
asset mix, refer to GPIF’s website at https://www.gpif.go.jp/gpif/
portfolio.html.

Current policy asset mix(From April 2020)(Unit: %)Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

25

25

25

25

±7

±6

±8

±7

Target allocation
Deviation
limitsAsset class
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 beclassified 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 andresolution 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: %)Domestic bonds

Domestic equities

Foreign bonds

Foreign equities

Target allocation

35

25

15

25

Deviation limits

±10

±9

±4

±8

30

Investment Results in Fiscal 2020

2 Overview 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 support 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, Labourand Welfare carries out a financial verification at least every
five years based on the outlook for population andeconomic trends. The most recent verification conducted in2019 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.

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

1.2%
Growth scenario(Cabinet Office estimate)

Scenario II

1.1%

Scenario IV 0.8%

Base scenario(Cabinet Office estimate)

Scenario V

0.3%

0.6%

Scenario VI 0.3%

2028

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

2029

Current period(in accordance with Cabinet Office estimates)

Long-term average

Assumed future state of theeconomyEconomic assumptions(Reference)

Rate of return on investment
SpreadReal(adjusted for (adjusted forwages)CPI)

Real economic
growth ratefrom FY2029
20–30 years

Total factor
Labor force
productivity (TFP) CPI increase rateparticipation rate
growth rate

Real wage growthrate(adjusted for CPI)

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%

ScenarioI

Economic growth
Cabinet Office
and increasing
Scenario estimate for thelabor forceII
growthparticipation
scenario
scenario
Scenario
III
Partial economic
growth andincreasing labor
force
Scenario Cabinet Office participationV
scenario
estimate for thebase scenario
Neither
economic growth
Scenario
nor increasingVIlabor force
participation(Note) Details of 2019 financial verification are posted on the MHLW website:
https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/nenkin/nenkin/zaisei-kensyo/index.html.

31

1.3%

Scenario III 0.9%

0.8%

ScenarioIV

Scenario I

Investment Results in Fiscal 2020

2 Overview of the Policy Asset Mix[3] Details of policy asset mix formulation
Considerations in the Medium-term Objectives

Policy asset mix formulation process

A. Based 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 lessthe nominal wage growth rate) on reserve assets with theminimal risks.
B. The policy asset mix must be formulated from a longterm perspective and it should incorporate generally
recognized asset management expertise, domestic
and overseas economic trends, and forward-looking
risk analysis.
C. The downside risks of underperforming the nominal
wage growth rate cannot exceed the portfolio comprised
solely of domestic bonds, and appropriate consideration
should be given to the fact that the downside risks forequities may be larger than expected. The probability
that planned reserves may become smaller thanoriginally anticipated should be properly accounted forand a thorough analysis of multiple risk scenarios should
be conducted.

Chapter 1

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 ofreserve fund:

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 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 (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 thefinancial 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
when setting wage-adjusted expected returns.
D. The improved estimation method for expected returns enhances the accuracy of the optimization and is likely toresult in 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 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
peak out 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 policy asset mix over the next 50 years, andcompared them with planned 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, asthese assets 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 class

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)
32

Investment Results in Fiscal 2020

2 Overview of the Policy Asset Mix

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 this withthe equilibrium return rate (Note1) 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 (Note2) for each asset that adds
a risk premium to short-term interest rates, and combined

this with the equilibrium return rate deemed intrinsic tomarket capitalization. The expected return for short-term
interest rates which forms the basis for calculations isestimated 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).

(Note 1) The equilibrium return rate is the implied market return derived by observing current indicators such as global market capitalization and risk andcorrelations 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.

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/.

33

Investment Results in Fiscal 2020

2 Overview of the Policy Asset Mix

Selection of policy asset mix
We selected the policy asset mix from the following perspectives.
Chapter 1

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
are invested in domestic bonds, and the smallest “conditional average shortfall rate”.

We continued to apply the currently used 5% interval to compose the policy asset mix. GPIF has also confirmed that thepolicy asset mix should fall within the range of the reference asset mix.
[Current policy asset mix profile](Unit: %)Conditional average shortfall rate

Real return

Nominal return

Standard deviation

Lower partial
probability

Normal distribution

Empirical
distribution (Note)

1.7

4.0

12.32

44.4

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.

Risk verification for formulating the current 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 over one
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 current policy asset mix.

Results indicate that the probability (risk) where fundsize fall below the planned level has declined compared to
the former policy asset mix. Meanwhile, a simulation
conducted with an all-domestic-bond portfolio resulted inalways smaller compared to the planned reserve assets.
From the above-mentioned overall perspectives with the
aspects of lower partial probability and conditional average
shortfall rate, the policy asset mix is the most efficient
portfolio to meet the investment objectives while minimizing
downside risk.

Comparison with planned reserve
Pension reserves(¥trillion)

1,500
Current policy asset mix

1,200
900

Probability (risk) of falling
below planned reserves

All-domestic-bond-portfolio
Reserve asset that the financial
verification assumes(Unit: %)75th percentile

Previous policy asset mix

Median600

300

25th percentile
25th percentile

0
2020

2025

2030

2035

2040

2050

2055

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

Current policy
asset mix

38.1

39.8

All-domestic-bondportfolio

100.0

100.0

Previous policy
asset mix

2060

In 50 years(Reference)Median 75th percentile

2045

In 25 years(Unit: %)

40.0

43.0

2065 (FY End)

34

Investment Results in Fiscal 2020

2 Overview of the Policy Asset Mix

Implementation of stress tests in fiscal 2019 for formulating the current policy asset mix.
GPIF conducted multiple stress tests under the assumptionof the occurrence of a financial crisis. The stress tests wereconducted based on the respective scenarios using actual
market data in the aftermath of the global financial crisis in2008 and the dot-com bubble burst in 2000.

Results in both scenarios indicate that the cumulativevalue of real return temporarily falls, but turns upward to thelevel of expected return following a subsequent market
rebound several years later.

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

120

80

Actual rate of return
Expected real return under the current 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 that similar 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 December 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 the 2019 financial verification was disclosed, the four entities discussed and formulated a new reference asset mix
as follows:(Unit: %)35

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

Investment Results in Fiscal 2020

3

3 Basic Policy of Portfolio Risk Management

Basic Policy of Portfolio Risk Management

The purpose of investing the pension reserves 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) stipulatethat GPIF 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
and economic 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.
GPIF adopted the new policy asset mix in fiscal 2020. Sincelong-term investment results shall be mostly attributable toa policy asset mix, we believe that the policy asset mix isthe 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 indexes frommultilateral perspectives. In cases when it is considerednecessary to take a certain measure, GPIF carries out anappropriate measure in line with a predetermined rule.
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 ina timely manner, so that risks can be discussed at theInvestment Committee and the Portfolio Risk Management
Committee and periodically reports to the Board ofGovernors. As such, we implement appropriate measures
taking into account long-term risk-return profiles.

Chapter 1[1] Basic policy<“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 foreach 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 andmarket 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 portfolio 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)
The risk of incurring losses due to reduction or elimination of the value of assets, including derivatives,
Credit risk due to factors such as deterioration in the financial position of issuers of the portfolio assets, institutions
entrusted with asset management, etc. or counterparties of derivatives transactions
The risk of incurring losses in foreign assets due to foreign currency situations or political and economic
Country risk
conditions of countries relevant to the said assets
36

Investment Results in Fiscal 2020

3 Basic Policy of Portfolio Risk Management[2] Risk management based on a policy asset mix
As mentioned above, GPIF believes that the most importantestablishes alarm points within these limits in order toaspect of portfolio risk managements is a proper managementsmoothly and appropriately manage its asset allocations withinof asset allocation based on a policy asset mix. Since thethe deviation limits, and sets a policy to clarify a responsive

markets constantly change, it is essential to establish aprocess in the event of exceeding these two limits. In fiscal

framework that enables GPIF to manage investments flexibly

2020, there were no assets that exceeded the deviation limits

within a reasonable range, while actual investments shall beor alarm points. While the upper limit for alternative assets iscarried out based on the policy asset mix. Accordingly, GPIF

set as 5% of the total assets, we have also established alarm

flexibly manages the policy asset mix within deviation limits

points for the assets and expressly states a responsive

defined for each of four types of assets—domestic bonds,

process in the event of the exceeding of these two limits. GPIF

foreign bonds, domestic equities, and foreign equities—as wellmanaged investment of alternative assets within the upper limit

as overall bonds and overall equities. At the same time, GPIF

and the alarm point in fiscal 2020.

(%)
40.0
(%)
40.0
35.0
35.0
30.0
30.0
25.0
25.0
20.0
20.0
15.0
15.0
10.0
10.0

30.0
25.0
25.0
20.0
20.0
15.0
15.0
10.0
10.0

Upper deviation limit

25.92%
25.92%
25.00%
25.00%

Actual allocation
Policy asset mix

Actual allocation

Policy asset mix

Lower deviation limit

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Foreign bonds
Foreign bonds

Policy asset mix

Actual allocation

Policy asset mix

Actual allocation

25.00%
25.00%
24.61%
24.61%

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

Bonds

15.0
10.0
10.0

Actual allocation
Actual allocation
Lower deviation limit
Lower deviation limit

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Foreign equities
Foreign equities
Upper deviation limit
Upper deviation limit
Actual allocation

30.0
25.0

15.0
10.0
10.0

25.00%
25.00%
24.89%
24.89%

Actual allocation
Policy asset mix

25.0
20.0

65.0

Policy asset mix
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

Equities

Upper deviation limit

60.0

50.54%

Actual allocation

50.0

50.00%

Policy asset mix

40.0

30.0

25.0
20.0

25.00%
25.00%
24.58%
24.58%

Policy asset mix

(%)
70.0

Upper deviation limit

55.0

35.0

Policy asset mix

20.0
15.0

Lower deviation limit

60.0

45.0

30.0
25.0

35.0
30.0

Upper deviation limit

Upper deviation limit
Upper deviation limit

(%)
40.0
(%)
40.0
35.0

Upper deviation limit

Domestic equities
Domestic equities

35.0
30.0

20.0
15.0

Lower deviation limit

(%)
70.0
65.0

(%)
40.0
(%)
40.0
35.0

Upper deviation limit

(%)
40.0
(%)
40.0
35.0
35.0
30.0

Management of deviation limits

Domestic bonds
Domestic bonds

55.0

Actual allocation

Policy asset mix

50.00%

50.0

49.46%

45.0
40.0

Lower deviation limit

Mar

Apr

May

Jun

35.0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

30.0

Lower deviation limit

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 four Medium-term Plan are ±7% for domestic bonds, ±6% for foreign bonds, ±8% for domestic equities, ±7% for foreign
equities. ±11% for bonds, and ±11% for equities.

37

Investment Results in Fiscal 2020

3 Basic Policy of Portfolio Risk Management

VaR ratio is obtained by dividing VaR (Note2) for the actual

In addition to risk management with the abovementioned deviation limits and upper limit established for

asset mix by VaR for the policy asset mix, an indicator foralternative investment, estimated tracking errors (Note1) of themonitoring as to what extent the risk amount of the actual

overall assets and VaR ratio continue to be our monitoring

portfolio deviates from that of the policy asset mix.
In fiscal 2020, the ratio remained at around 1. During

In fiscal 2020, the estimated tracking errors of the

fiscal 2020, the deviation of the equity risk due to the stock

overall assets reached 108 bp (1 bp is equivalent to 0.01%)

price recovery, and the one of the spread risk incurred mainlyin June due in part to the stock price recovery. However, it

by purchases of foreign corporate bonds, fromwent down to 51 bp at the end of fiscal 2020 after various

corresponding respective risk amounts of the policy asset

measures were taken to match the rate of investment returnmix, grew relatively larger. As a result, the divergence fromof the portfolio with the level of compound benchmark

the amount of risk in the policy asset mix reached 1.05 inreturn of the policy asset mix and market volatility calmed

June and August. But it narrowed down to 1.04 at the end ofdown. As a result, the risk amount declined significantly.

the fiscal year because domestic equities and foreign equities

Chapter 1

indicators from a multitiered risk management perspective.

were reduced by disposals and volatility were stabilized.
(Note 1) The estimated tracking errors are the ranges of returns that could be earned in the future at a given probability. These ranges are calculated with analysis
tools, etc. estimated by using statistically estimated mutual dependencies between securities in the portfolio.
(Note 2) VaR indicates the largest loss likely to be suffered for individual assets assuming a certain holding period with a given probability (confidence level).

Estimated tracking error of the overall assets
(%)

1.5
1.0
0.5

0.0

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

VaR ratio and VaRVaR ratio(%) VaR

VaR ratio

23.0

Policy asset mix:VaR

21.0

Actual asset mix:VaR

VaR-ratio

1.30
1.25

19.0

1.20

17.0

1.15

15.0

1.10

13.0

1.05

11.0

1.00

9.0

0.95

7.0

0.90

5.0

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

0.85

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

(%)

VaR (Two-year observation period)

40

(%)

the delta method:1

the delta method:95%

the delta method:1

30

30

20

20

10

10

0

VaR (Five-year observation period)40

Apr May Jun

Jul Aug Sep Oct Nov Dec Jan Feb Mar

0

Apr May Jun

the delta method:95%

Jul Aug Sep Oct Nov Dec Jan Feb Mar(Note) VaR is calculated using the delta method based on the 1 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).

38

Investment Results in Fiscal 2020

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

specific expertise, risk management of investment inand real estate) have different risk-return profiles fromalternative assets covers assessment items specificallytraditional assets such as listed equities and bonds.

required for in alternative investments, as well as those

Considering these profiles, the inclusion of alternative

common to traditional assets.

assets in GPIF’s portfolio is expected to generate

Enabling more elaborate risk management, GPIF will

diversification effects and improve the investment efficiency.

continue the efforts to ensure comprehensive, elaborate risk

Accordingly, GPIF has increased investments in alternative

management.

assets since fiscal 2017. To fulfill the need for target asset(Note) For details of risk management of alternative assets, refer to page 57.

[4] Risk management from a long-term perspective
Stress tests
Stress tests are used as one of the approaches forin the medium to long term. More specifically, in order tomeasuring the impact on returns and capital in the event of

secure objectivity in an analysis, GPIF conducts stress tests

a significant market movement, and determining a methodby using scenarios stemming from past actual events. In

to implement a proper measure accordingly. In general,

fiscal 2020, GPIF added the market drop scenario caused

stress tests are considered as a way to assess a short-termby the COVID-19 pandemic (1st wave) to the scenarios

impact suffered due to market fluctuations.

used in its fiscal 2019 analysis: i.e. the Global financial crisis

However, considering that a long-term perspective isof 2008–2009 when a massive fall in stock prices was

crucial to carry out investment management of the pension

seen, and the Dot-com bubble burst of 2001 followed by areserves stably and efficiently, medium-to long-term riskslow market recovery. The result shows that, in thesemanagement takes a higher priority for GPIF. GPIF’s stressscenarios, although actual accumulated returns on

tests are carried out, therefore, in reference to overseas

investments since 2001 (when GPIF started management

pension funds, by focusing on not only the assessment ofof the pension reserves) are temporarily affected, they

how much the risks will affect our portfolios in the short

resume an expected level in a few years following theterms but also the analysis of what impact will be generated

recovery of the markets.

(%)

120
110
100

Actual rate of return
Expected real return under the current policy asset mix
Stress Scenario (the Global financial crisis)
Stress Scenario (the Dot-com bubble burst)
Stress Scenario (the COVID-19 pandemic(1st wave))

90
80
70

GPIF adopted the current
policy asset mix

Stress tests

60
50
40

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 2027 (FY)

(Note 1) The investment results in the figure show a cumulative rate of investment return since 2001 {real return (net investment yield on the pension reserve fundless the nominal wage growth rate)}.
(Note 2) The figure for fiscal 2020 represents the result as of Dec. 31, 2020.
(Note 3) The vertical axis represents indexed numbers of a cumulative rate of return based on the starting point of the stress test (the actual rate of investment
return as of Dec. 31, 2020) as 100.

39

Investment Results in Fiscal 2020

3 Basic Policy of Portfolio Risk Management

ESG investment expected to reduce risks from a long-term perspective
social issues. Because ESG related risks, as symbolized byinvestments to be conducted safely and efficiently from theclimate change risks, etc., are expected to be more likely

long-term perspective, risk management based on thematerialized as investment horizon becomes longer, we

long-term perspective is further important for GPIF.

recognize that it is meaningful for GPIF to reduce these

GPIF’s investment approach takes ESG factors into accountlong-term risks through making ESG investments. In fiscal

in order to improve long-term returns from the whole assets

2020 like before, we continued to conduct investment

by reducing negative externalities such as environmental andactivities with consideration to ESG factors.

Chapter 1

Given the fact that the law requires pension reserve fundSecuring the amount of planned reserves
Another important issue is how to control risks that the

numbers to confirm the risks of an inability to attain theamount of pension reserves falls below the amount ofamount of planned reserves on the financial verification.

planned reserves in the long run. The current policy asset

Thus, we managed to select the most efficient portfolio

mix was formulated in fiscal 2019 through a process ofthat seeks to minimize downside risks, while meeting

simulation with a stochastic calculation using random

investment objectives.

(Note) For details of the current policy asset mix, refer to page 30-35.

Comparison with planned reserve
Pension reserves(¥trillion)

1,500
Current policy asset mix

1,200
900

Probability (risk) of falling
below planned reserves

All-domestic-bond-portfolio
Reserve asset that the financial
verification assumes(Unit: %)75th percentile

Previous policy asset mix

Median600

300

25th percentile
25th percentile

0
2020

2025

2030

2035

2040

2050

2055

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

Current policy
asset mix

38.1

39.8

All-domestic-bondportfolio

100.0

100.0

Previous policy
asset mix

2060

In 50 years(Reference)Median 75th percentile

2045

In 25 years(Unit: %)

40.0

43.0

2065 (FY End)40

Investment Results in Fiscal 2020

44 Status of Investment in Each Asset Class

Status of Investment in Each Asset Class[1] Domestic bonds
Excess rate of return
Concerning domestic bond investment, the excess rate ofinvestment by factor is as follows: benchmark factors (Note2):

return over the benchmark (Note1) was +0.02%. The-0.05%; fund factors (Note3): +0.06%; other factors (Note4):

breakdown of the excess rate of return on domestic bond+0.01%.
(Unit: %)Time-weighted rateof returnBenchmark

Excess rate of
return—Benchmark factors

Fund factors

Other factors

–0.68

–0.70

+0.02

–0.05

+0.06

+0.01

(Note 1) The benchmark of domestic bonds is NOMURA–BPI [excluding ABS].
(Note 2) Benchmark factors refer to those resulting from differences in the rates of return between manager benchmarks and the benchmark (NOMURA–BPI[excluding ABS]). They are calculated taking into consideration the market total average balance of each fund.
(Note 3) 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.
(Note 4) Other factors refer to calculation errors and such.

[2] Foreign bonds
Excess rate of return
Concerning foreign bond investment, the excess rate ofinvestment by factor is as follows: benchmark factors (Note2):

return over the benchmark (Note1) was +1.63%. The+0.21%; fund factors (Note3): +1.44%; other factors (Note4):

breakdown of the excess rate of return on foreign bond-0.02%.
(Unit: %)Time-weighted rateof returnBenchmark

Excess rate of
return—Benchmark factors

Fund factors

Other factors

7.06

5.43

+1.63

+0.21

+1.44

–0.02

(Note 1) The benchmark of foreign bonds is FTSE World Government Bond Index [not incl. JPY, no hedge/JPY basis].
(Note 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.
(Note 3) 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.
(Note 4) Other factors refer to calculation errors and such.

41

Investment Results in Fiscal 2020

4 Status of Investment in Each Asset Class[3] Domestic equities
Excess rate of returninvestment by factor is as follows: benchmark factors (Note2):

return over the benchmark-0.79%; fund factors (Note3): +0.21%; other factors (Note4):(Note1)was -0.59%. The

breakdown of the excess rate of return on domestic equity

Chapter 1

Concerning domestic equity investment, the excess rate of-0.01%.
(Unit: %)Time-weighted rateof returnBenchmark

Excess rate of
return—Benchmark factors

Fund factors

Other factors

41.55

42.13

–0.59

–0.79

+0.21

–0.01

(Note 1) The benchmark of domestic equities is TOPIX [incl. dividends].
(Note 2) Benchmark factors refer to those resulting from differences in rates of return between manager benchmarks and the benchmark (TOPIX [incl. dividends]).
They are calculated taking into consideration the market total average balance of each fund.
(Note 3) 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.
(Note 4) Other factors refer to calculation errors and such.

[4] Foreign equities
Excess rate of return
Concerning foreign equity investment, the excess rate ofinvestment by factor is as follows: benchmark factors (Note2):

return over the benchmark-0.26%; fund factors (Note3): -0.53%; other factors (Note4):(Note1)was -0.79%. The

breakdown of the excess rate of return on foreign equity+0.00%.
(Unit: %)Time-weighted rateof return

59.42

Benchmark

Excess rate of
return—Benchmark factors

Fund factors

Other factors

60.21

–0.79

–0.26

–0.53

+0.00

(Note 1) The benchmark of foreign equities is MSCI ACWI [not incl. JPY, JPY basis, incl. dividends, after taking into account GPIF dividend tax factors].
(Note 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 averagebalance of each fund.
(Note 3) 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.
(Note 4) Other factors refer to calculation errors and such.

42

Investment Results in Fiscal 2020

5

5 Investment in Alternative Assets

Investment in Alternative Assets[1] Overview
Alternative assets are the generic term for investment
assets that are “alternative” to traditional assets including
listed equities and bonds. Among a variety of alternative
assets, GPIF invests in infrastructure, private equity, andreal estate. The fourth Medium-term Plan (from fiscal 2020

to fiscal 2024) stipulates alternative assets to be categorized
into domestic bonds, foreign bonds, domestic equities, andforeign equities in accordance with risk-return profiles, andinvested up to a cap of 5% of the total portfolio.

Investment purpose
Alternative assets have different risk-return profiles fromtraditional assets such as listed equities and bonds.
Considering these profiles, the inclusion of alternative
assets in GPIF’s portfolio is expected to improve theinvestment efficiency and contribute to the stability ofoverall pension finance. Also, alternative assets have lower
liquidity while they produce higher investment return
compared to traditional assets. As a long-term investor
managing significant liquid assets, GPIF aims to earn
excess return while improving the investment efficiency of
GPIF’s portfolio by strategically holding alternative assets
with lower liquidity in the portfolio.

Pension funds in other countries have been promoting
diversification by investing in alternative assets for the
aforementioned characteristics and effects. Prior to starting
investment in alternative assets, GPIF carried out careful
examinations in commissioned research projects. In
particular, the research conducted in fiscal 2012 reported
that the inclusion of alternative investments is expected torealize investment premium for illiquidity and improve theefficiency of investment through diversification. By taking
into account the results of such research projects, GPIF has
increased investments in alternative assets since fiscal
2017.

Alternative Assets
Infrastructure

Private equity

Real estate

Investment history
Based on the results of the above-mentioned
commissioned research projects, GPIF has been investingin alternative assets through a co-investment platform withinstitutional investors since 2013 (in infrastructure since
fiscal 2013 and in private equity since fiscal 2015).
In fiscal 2017, GPIF started calling for applications fromasset managers for alternative assets through the AssetManager Registration System and went through thescreening process for external asset managers for
executing customized multimanager strategies* for GPIF.
GPIF has worked continuously to develop theorganization for investing in alternative assets by various
measures, such as by establishing a specialized unit
(Private Market Investment Department), employing experts,
examining investment strategy by external advisors (since

43fiscal 2015), and developing a risk management framework.
Considering the individuality of the investment performanceand the low liquidity of alternative assets, risk management
at the time of investment evaluation and after execution of
investment is an important issue. GPIF will strive continually
to enhance the framework for investing in alternative assets,
including risk management.
※A multi-manager strategy is an investment approach to diversify theinvestment into multiple funds. A multi-manager strategy also called as afund-of-funds, an investment vehicle where a fund invests in a portfolio
composed of multiple other funds. GPIF selects external asset managers
that execute multi-manager strategies for each investment style ofalternative assets of GPIF, and gives discretion to the appointed external
asset managers to make individual investment decisions.

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

Research of alternative investment schemes (Mar. 2013)
Infrastructure co-investment program with DBJ and OMERS (Feb. 2014)

Discretionary investment mandate for real estate (Global-Core)(Sep. 2018)

FY2015FY2016FY2017FY2018FY2019Call for applications of asset managers (Apr. 2017)
Discretionary investment mandate for real estate(Japan-Core) (Dec. 2017)
Discretionary investment mandates for infrastructure(Global-Core) (Jan. 2018)

Chapter 1

Appointment of external advisors for implementation (Feb. 2017)
Portfolio risk management framework formation (Mar. 2017)

FY2020Discretionary investment
mandate for global
private equity(Apr. 2020)

Alternative Investments included in Policy Asset Mix for the third Medium-term Plan (Apr. 2015)
Emerging Markets PE co-investment program with IFC (Jun. 2015)
Appointment of external advisors for investment strategy planning (Oct. 2015)

Total value of alternative assets up until fiscal 2020(¥billion)

1,341.9

1,400
1,200

Infrastructure (Discretionary investment)
Infrastructure (In-house)
Real estate (Discretionary investment)

1,000

944.5

Private equity (Discretionary investment)

571.1

Private equity (In-house)

800

390.4

165.0

600

432.7
400

213.0

200
0

83.3

0.2

5.5

2014/3

2015/381.4
1.9
2016/3

100.6
96.4
4.2
2017/3

The amount of alternative assets under management of
GPIF has been steadily accumulated in recent years, while
it has been developing investment capabilities. The total
value of GPIF’s investment in alternative assets as of theend of March 2021 is ¥1,341.9 billion (0.70% of the total
value of the pension reserve fund).

50.0
146.7
8.1
8.2
2018/3

154.7

148.8

544.7

144.8

380.8

124.9
14.3
2019/318.5
2020/336.7
24.4
2021/3The current fourth Medium-term Plan stipulates
alternative assets to be invested up to a cap of 5% of thetotal portfolio. We will continue improving investment
efficiency by steadily adding quality alternative assets, while
paying due attention to the market circumstances andinvestment risks.

Activities in fiscal 2020
A. Call for application, selection of Gatekeepers and Fund of Funds managers
Following on from last year, GPIF called for applications
from external asset managers in alternative assets by
utilizing the Asset Manager Registration System and went
through the screening process to select external asset
managers that execute customized multi-manager
strategies for GPIF.
With an addition of external asset managers for private
equity investments, multi-manager strategies are set to be
executed for all of the three alternative asset types.

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

44

Investment Results in Fiscal 2020

5 Investment in Alternative Assets(Example) Infrastructure investment scheme
discretionary
investment
managementagreement

GPIF
Allocate capital based on investment
decision by asset managers

investment

Asset Managers

investment
management

Fund of Funds

Selected by
GPIF to execute
multi-manager strategy

Gatekeeper

Fund of Funds
Managerdiversified through multiple funds

Infra Fund A

Infra Fund B

investment

investment

Infra Asset A

Infra Asset B

Infra Asset C

Investments are conducted based on a discretionary
investment management agreement. Appointed asset
managers set up a fund-of-funds solely for GPIF and invest
in funds in accordance with the pre-agreed guidelines thatdefine investment objectives, strategies, and certain
restrictions, etc.
Each fund will then invest in individual alternative assets.
However, it takes a certain amount of time from identifying
investment opportunities to the completion of various
investigations (due diligence). It is also important to diversify(Note) Investments in private equity and real estate areor will be executed based on similar investment
scheme.

Infra Asset D

the timing of investment over multiple years for optimal
portfolio time diversification. Therefore, it takes a long timeto invest in alternative assets.
GPIF receives a periodic report on the status of portfolio
assets and monitors the performance and risks. In addition,
GPIF conducts annual comprehensive evaluation of external
asset managers, and properly manages investment byconfirming that their fund management team composition
has not changed and by monitoring the progress of theirinvestment plans.

B. Development in preparation for investment in limited partnerships (LPs)
By revising Ordinance for Enforcement of the GPIF Act in
September 2017, interests in limited partnerships (LPs)as limited partners were added to the securities in which
GPIF may invest directly. The expected benefits ofdirectly investing in LPs include faster access to
information on investees, improvement of net returns andenhancing risk management through simplified
investment scheme with fewer intermediaries involved
between investors and investees. Therefore, suchinvestments in LPs have been generally adopted byinstitutional investors including pension funds in othercountries to invest in alternative assets.
Following the revision of the Ordinance, GPIF started
preparation for such investments including developing a risk
management framework, etc. from fiscal 2017. In fiscal
2020, GPIF conducted such preparation including an
in-depth assessment of alternative investment performance.
It also examines the means and strategies required for GPIF
to fulfill its stewardship responsibilities in future investmentin LPs.

C. Investment status of alternative assets
Investment status as of the end of March 2021
Total of alternative assets

Infrastructure

Real estate

Private equity

Capital commitment (¥billion) (Note1)

2,981.0

1,138.9

1,134.0

708.1

Total value (¥billion)
Internal rate of return (IRR) up until
fiscal 2020 (in JPY terms)
Domestic assets (in JPY terms)
Foreign assets (in USD terms) (Note2)
Foreign assets (in JPY terms) (Note3)

1,341.9

736.2

544.7

61.0

4.89%

3.86%

7.23%

6.25%

5.29%
4.32%
4.83%

3.57%
3.69%
3.87%

5.70%
6.74%
8.23%

–
3.83%
6.25%

(Note 1) The capital commitment refers to the sum of the amounts agreed on as the maximum amount of capital to be contributed by GPIF to individual external
asset managers at the start of investment.
(Note 2) The rates are based on the sum of the assets invested in foreign assets (currency: USD).
(Note 3) The amount of foreign currency-denominated assets is calculated by converting the amount into JPY.

45

Investment Results in Fiscal 2020

5 Investment in Alternative Assets(Column) Analysis on changes in market value in fiscal 2020
Chapter 1

During the year beginning from the end of March 2020, the market value of GPIF’s alternative assets increased by¥397.5 billion. The increase can be mainly divided into five factors:
Capital contribution to new investments (+¥350.0 billion):A fund makes a capital call (request making capital contribution) to investors for executing a new investment. An
investor makes a capital contribution to the fund, which increases the market value of alternative assets of theinvestor. In fiscal 2020, investments have been executed in all three asset categories of alternative assets, bystarting discretionary investment in private equity in addition to infrastructure and real estate.
Distributions received (-¥37.7 billion):
When a fund receives the returns from investees and paid out the income and capital realized to an investor, thisdecreases the market value of alternative assets of the investor. In fiscal 2020, GPIF received distributions, mainly
dividends from its investees in infrastructure and real estate.
Fees and expenses (-¥3.8 billion):
The amount includes fees and expenses for acquisition and disposition incurred by fund-of-funds and investment
trusts (equivalent to 0.35% of the average of outstanding amount of alternative assets in fiscal 2020).
(Note) The amount paid by investee funds-of-funds and investment trusts is added up by GPIF. The amount of investment trusts is a roughestimate.

Changes in market value of investees (+¥56.8 billion):
After a fund invested in alternative assets, the market value increases/decreases in accordance with unrealized
gains or losses based on the valuation of the investee and realized gains or losses from the disposition of
investees. In fiscal 2020, the market value of the overall alternative assets increased, although some investees’
market value decreased in sectors heavily affected by the COVID-19 pandemic.
Fluctuations in currency exchange (USD) (+¥32.2 billion):In the event of foreign investment (currency: USD), the yen-equivalent market value may appreciate/depreciate due
to a currency fluctuation between USD and JPY. It increased due to the depreciation of JPY in the second half offiscal 2020.

Analysis on changes in market value of alternative investments (from April 2020 to March 2021)
CapitalCommitment
2,981.0(¥billion)

1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500

56.8

350.0
-37.7

32.2

1,341.9

-3.8

944.5

Total value(End of March 2020)

Capital contribution
to new investments

Distributions received

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2021)
exchange (USD)(Column) Method of measuring the rate of investment return on alternative assets
While the investment performance of listed assets such as equities and bonds instruments is often measured in theform of time-weighted rate of return, the investment performance of alternative assets is generally measured in the formof internal rate of return (IRR) since inception. The internal rate of return (IRR), also known as money-weighted rate of
return, is a rate of investment return calculated with consideration to the timing and size of cash flow (including capital
contribution and distributions) between investors and funds.
While traditional asset investment allows investors to specify the allocation of capital and the timing of withdrawals,
alternative asset investment allows asset managers of the funds to specify the timing of acquisition and disposition ofassets, request investors to contribute capital accordingly, and distribute the realized capital and income. Therefore,
internal rate of return (IRR) is used based on the understanding that decision-making on the timing and the size of cash
flows is part of the asset managers’ investment capabilities. In GPIF’s Review of Operations, investment results of
GPIF’s overall assets including alternative assets are presented as time-weighted rate of return, while investment resultsof alternative assets are also presented as internal rate of return (IRR).
46

Investment Results in Fiscal 2020

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

GPIF’s investment
A. Investment approach
GPIF aims to achieve stable returns mainly from investment income in a timely and efficient manner, in consideration ofvarious 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 2020, 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 ofinvestment

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.

47

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

C. Investment status
airports, was negatively affected by the COVID-19

end of March 2021 was ¥736.2 billion, which increased bypandemic, the market value of the overall infrastructure¥191.0 billion from the end of March 2020. Although theassets increased thanks to a rise in the market value of themarket value of a part of the transportation sector, such asother sectors and currency fluctuations.

Chapter 1

The total value of GPIF’s infrastructure investment as of theAnalysis on changes in market value of infrastructure (From April 2020 to March 2021)
CapitalCommitment
1,138.9(¥billion)

800.0

163.7

700.0
600.0

-14.2

736.2

24.5

19.5

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2021)
exchange (USD)

-2.5

545.1

500.0
400.0
300.0
200.0

Total value(End of March 2020)

Capital contribution
to new investments

Distributions received

Fees andexpenses (Note)(Note) The amount paid by investee funds-of-funds and investment trusts is added up by GPIF. The amount of investment trusts is a rough estimate.

The breakdown of portfolio by country shows the UK with the largest share at 23%, followed by the U.S. at 22% andAustralia at 11%. As for the breakdown of the portfolio by infrastructure sector, the largest share went to renewable energy at
21%, followed by utility (electricity/gas) at 12% and airport at 11%. GPIF expects stable revenue to be generated mainly fromits diversified core infrastructure portfolio. Internal rate of return (IRR) from the foreign infrastructure investment stood at
3.69% in USD terms, and IRR from the domestic infrastructure investment stood at 3.57% in JPY terms since its inception in
February 2014. The total dividend (excluding repayment of principal) received from a unit trust and fund of funds during theprevious fiscal year was ¥10.1 billion.

Value by country
Germany 3%

Value by sector
Water Supply and
Sewerage 6%

OthersFrance 3%7%

Belgium 4%
Sweden5%

EnergyUK

6%23%

Other Transportation

Others7%

Renewable
Energy21%

6%Canada

6%

Japan

U.S.

7%

22%
Spain

9%

11%

12%

10%
Telecommunications

Australia

Utility(Electricity/Gas)

Gas/
Oil Pipeline

10%

Airport
Port

11%

11%

48

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

Infrastructure investment case 1
Renewable energy facility —U.S.—
GPIF has participated in a co-investment for renewable energy assets in the U.S. with a utility company in the U.S.
and an institutional investor in North America. The facility is equipped with a solar power generation facility with acapacity of up to 1.2 GW and a wind power generation facility with a capacity of up to 140 MW. The generated poweris sold based on a feed-in tariff scheme, and the assets earn stable revenue over the long term.

Infrastructure investment case 2
Port operator company —U.S.—
GPIF has invested in the largest port operator in North America through an infrastructure fund. The company operates
more than 30 ports and 70 terminals, facilitating the transportation and operation of container cargo, bulk cargo,
automobile shipment and cruise ships. The ports operated by the company are located at the eastern and westernend of the continent and constitute a portfolio well-diversified geographically.

49

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

Infrastructure investment case 3
On-shore wind farm facility —Japan—
electricity generated is sold under a Japanese feed-in tariff scheme, promising stable revenue over the long term. Partof the power plant with a panoramic view of the surrounding landscape has become a popular tourist attraction

Chapter 1

GPIF has invested in a wind farm in operation through a fund that invests in renewable energy assets in Japan. The

among local residents.

[3] Private equity
Overview
In private equity, GPIF invests primarily in funds with focus

capital for growth and expansion of companies), Ventureon equities of private companies (private equity, or “PE”

capital funds (investing in start-up and early stage

funds). PE funds generally seek investment opportunities incompanies, etc. for growth potential), Turnaround funds

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

investment timing. Types of PE funds include Buyout funds

financial challenges through balance sheet restructuring,(seeking to create enterprise value of investee companiesetc.), and Private debt funds (investing in debt instruments

by improving post-investment management practices andof private companies). GPIF makes diversified investments

corporate governance), Growth equity funds (providing

in PE funds of these types.

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.

50

Investment Results in Fiscal 2020

5 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 WorldBank Group, GPIF has held a unit trust that invests in PE of consumer-related companies, etc. in emerging markets sinceJune 2015. The objective is to gain investment returns from the growth of the global economy in a well-balanced mannerby adjusting the bias toward particular sectors in emerging markets public equity and investing in the strong potential for
growth from favorable demographic shifts and economic developments down the road, such as consumer-relatedcompanies.
(ii) Discretionary investment
In fiscal 2020, GPIF selected an additional external asset manager focusing on Global-Diversified Strategy. The strategy,
which seeks diversification mainly in PE funds in developed countries, is executed through the following two funds.
Start ofinvestment

Asset manager name

Investment styleGatekeeper: Neuberger Berman East Asia Limited
Fund of Funds Manager: NB Alternatives Advisers LLC
Gatekeeper: Mitsubishi UFJ Trust and Banking Corporation
Fund of Funds Manager: Hamilton Lane Advisors, L.L.C.

Global-Diversified
Strategy
Global-Diversified
Strategy

April 2020
January 2021

C. Investment status
The total value of GPIF’s private equity investment as of the

fiscal 2020, despite fees and expenses incurred due mainly

end of March 2021 was ¥61.0 billion. Those increased by

to organize a new discretionary fund-of-funds, market value¥42.5 billion from the end of March 2020. The assets underappreciation of investment trusts and currency exchange

management increased, attributable mainly to investments

fluctuations largely contributed to an increase in the market

made by newly selected discretionary asset managers. In

value of the overall PE assets.

Analysis on changes in market value of private equity (From April 2020 to March 2021)
CapitalCommitment
708.1(¥billion)

80.0
70.0

1.3

40.1

60.0

-1.2

50.0

2.4

61.0

-0.2

40.0
30.0
20.0

18.5

10.0
0

Total value(End of March 2020)

Capital contribution
to new investments

Distributions received

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2021)
exchange (USD)(Note) The amount paid by investee funds-of-funds and investment trusts is added up by GPIF. The amount of investment trusts is a rough estimate.

51

Investment Results in Fiscal 2020

5 Investment in Alternative Assets(Column) J-Curve effect of private equity investment

The breakdown of portfolio by country shows North

strategy (fund-of-funds) proceed. By sector, investments

America with the largest share at 35%, followed by

are diversified into a wide range of industries, including the

emerging countries mainly in Asia. Investments in emerging

consumer-related sectors such as consumer discretionary

countries have been relatively large because an initialand consumer staples, and materials. The internal rate ofinvestment was made through in-house investment trusts.

return (IRR) from the entire PE investment stood at 3.83%

However, GPIF’s PE investment in developed countries willin USD terms (as of the end of March 2021) since its

expand as investments through discretionary investment

inception of in-house investment in investment trusts inagreements with external managers for the multi-manager

June 2015.

Value by country/region
Other Asia 5%

Latin America 4%

Chapter 1

In general, private equity (PE) fund investments involve payment of fees and deliver negative returns in the early years,
and later record an unrealized profit gradually as the portfolio companies increase in value. At the exit, the unrealized
gain will be realized and PE fund earns a high profit. Since the progression of cumulative investment earnings of a PE
fund appears as a “J” shape on a time-series graph, the phenomenon is called the “J-Curve effect.”
One of the fees and costs incurred by PE fund investment is organizational costs which affect performance in theearly years. Since PE funds invest in companies in various industries, jurisdictions, and taxation systems, fees paid tolegal, accounting, and taxation professionals tend to be costly. In addition, the level of management fees paid to asset
managers is also higher in general than those paid to traditional asset managers. As a long-term investment, it generally
takes several years from when the fund starts management, identifies investee companies, makes capital contributions,and delivers investment gains as the portfolio companies eventually mature and are exited. In the meantime, GPIF
endeavors to ascertain the fees and expenses charged to the fund-of-funds and the investment trust, and monitors theperformance of the investee fund after deducting the fees and expenses of funds in which it invests.

Value by sector
Others 0%

Communication Services 6%
Industrials

7%

Middle East / Africa

7%

Consumer
Discretionary

Financials

9%

EuropeNorth America

35%

12%

12%

Consumer Staples

17%

India

15%

19%

Information
Technology

Health Care
China

22%

13%

Materials

17%52

Investment Results in Fiscal 2020

5 Investment in Alternative Assets[4] Real estate
Overview
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 logistics, offices, residential(prices fluctuate according to supply and demand and theproperties and retails.

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

GPIF implements “core-style” investment strategy,

tends to be relatively large. At the same time, it iswhich is expected to generate stable rental income fromnecessary to engage asset managers and/or property

tenants, and this strategy has been adopted as the major

managers, etc. to sustain asset value over the long term.

investment strategy by pension funds in other countries as

GPIF promotes investments in a careful and strategic

well. In the meantime, it is important to diversify the timing

manner, taking into account the above-mentioned profilesof investment and the type of investment products,of real estate investment.

GPIF’s investments
A. Investment approach
GPIF targets stable returns in a timely and efficient manner, in consideration of various market conditions with the focus ondiversified 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 invested real estate assets.
(i) Discretionary investment
Throuout the fiscal year of 2020, GPIF has been building a global and diversified investment portfolio focused on its corestyle investment strategy, with an investment manager for domestic and foreign markets appointed in 2017 and 2018
subsequently. In February 2021, a new external asset manager for global JV/Club investments was hired for further
diversification of our portfolio.
Asset manager name

Investment style

Start ofinvestment

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

53

Global-Core
Commingled Fund
Investments
Global-Core
JV/Club Type
Investments

September 2018

February 2021

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

C. Investment statuscertain sectors such as retail properties was negatively

March 2021 was ¥544.7 billion. Those increased by 163.9

affected by the COVID-19 pandemic, but the market value

billion from the end of March 2020. The market value ofof overall real estate assets increased.

Analysis on changes in market value of real estate (From April 2020 to March 2021)

Chapter 1

The total value of real estate investment as of the end of

CapitalCommitment
1,134.0(¥billion)

800.0
700.0
600.0

146.1

500.0

-22.3

380.8

400.0

544.7

31.0

10.3

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2021)
exchange (USD)

-1.1

300.0
200.0

Total value(End of March 2020)

Capital contribution
to new investments

Distributions received

Fees andexpenses (Note)(Note) The amount paid by investee funds-of-funds and investment trusts is added up by GPIF. The amount of investment trusts is a rough estimate.

The breakdown of portfolio by country shows Japan, inon core-style real estate funds in advanced countries.

which GPIF started investment in 2017 ahead of other

Internal Rate of Return (IRR) of domestic real estate

countries, with the largest share at 38%. This was followed

investment since December 2017 inception is 5.70%

by foreign real estate investment including the U.S. (31%),(yen-denominated), while that of foreign real estate

Australia (6%), and UK (6%), which GPIF started managing

investment since September 2018 inception is 6.74%

through newly selected foreign asset managers since 2018.

(USD-denominated). Dividend received from the Fund of

As for the breakdown by property sector, office sector

Funds in fiscal 2020 (excluding repayment of principal) wascomprised the largest share at 39% of the total portfolio,¥13.3 billion in total. We will continue investing in real estate

followed by logistics at 34%, residential properties at 16%,

funds, while paying attention to the market circumstances,and retail at 9%. The investment is diversified and focused

advised by external consultants.

Value by country

Value by property sector
Others 2%

Germany 4%
OthersRetail9%9%France 6%
UK

6%

Japan

38%

Australia

Residential
Properties

Office

39%

16%

6%

U.S.

Logistics

31%

34%

54

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

Real estate investment case 1
Office —U.S.—
GPIF has invested in a real estate fund that owns offices and R&D facilities in major cities in the U.S. and Europe
where life science research institutes and companies are concentrated.
For the growing life science industry, locations adjacent to well-known university laboratories attract exceptionallystrong demand from major pharmaceutical companies and venture entities. Despite the spread of COVID-19, GPIF
enjoys stable rental income through a long-term leasing contract with tenants.

(Note) Property owned by the fund in California, the U.S.

Real estate investment case 2
Logistics —Australia—
GPIF has invested in a fund that mainly owns logistics facilities in the suburbs of major cities in Australia.
Even in Australia where e-commerce penetration had been lagged, net sales of the e-commerce business in theprevious years increased significantly. With retailers of daily necessities such as groceries as the main tenant group,
the property’s tenants are well-diversified across transporters and manufacturers.

(Note) Property owned by the fund in Victoria, Australia.

55

Investment Results in Fiscal 2020

5 Investment in Alternative Assets

Real estate investment case 3
Logistics —Japan—area, and Kyushu area that are tied to a long-term leasing contract with a major transportation company.
The properties, equipped with a refrigerator system and used as a hub for a distribution network of pharmaceutical

Chapter 1

GPIF has invested in a fund that owns large-scale logistics facilities located in the Tokyo metropolitan area, Kansai

products, are hard to access, large-scale new logistics facilities adjacent, i.e., “Last Mile” to the center of huge
consumer areas.

Real estate investment case 4
Private REITs
Since the start of domestic real estate investment in January 2018, GPIF has invested in nine private REITs withdiversified portfolios, and their total market value as of the end of March 2021 was ¥50.7 billion.
Portfolio holdings of private REIT as of the end of March 2021
Private REIT name
SG ASSETMAX-REIT
DAIWA RESIDENTIAL PRIVATEINVESTMENT CORPORATION
DBJ PRIVATE REIT INC.
DREAM PRIVATE REIT INC.
NIPPON OPEN ENDED REAL ESTATEINVESTMENT CORPORATIONNIPPON TOCHI-TATEMONO PRIVATEREIT INC.
NOMURA REAL ESTATE PRIVATE REIT,
INC.
BROADIA PRIVATE REIT, INC.
MITSUI FUDOSAN PRIVATE REIT INC.

Asset manager name
SG ASSETMAX CO., LTD.
DAIWA REAL ESTATE ASSETMANAGEMENT CO. LTD.
DBJ ASSET MANAGEMENT CO., LTD.
DIAMOND REALTY MANAGEMENT INC.
MITSUBISHI JISHO INVESTMENTADVISORS, INC.
NITTOCHI ASSET MANAGEMENT CO., Ltd.
NOMURA REAL ESTATE ASSETMANAGEMENT CO., LTD.
TLC REIT MANAGEMENT INC.
MITSUI FUDOSAN INVESTMENTADVISORS, INC.

Total

Market value(¥billion)
3.3
0.9
5.1
8.6
8.7
2.0
9.2
5.7
7.1
50.7

(Note 1) Funds are listed in the order of the Japanese syllabary.
(Note 2) The names of funds are as of the end of March 2021.
(Note 3) The figures above are rounded off, so the sum of each item does not necessarily match the total number.

56

Investment Results in Fiscal 2020

5 Investment in Alternative Assets[5] Portfolio risk management of alternative assets
In fiscal 2020, GPIF further introduced intro risk

may affect market prices in more detail, then reports the

management measures for alternative assets, in addition to

outcome to the Portfolio Risk Management Committee, etc.

the ongoing development and enhancement of the risk

for verification. Going through such internal steps, GPIF

management system. GPIF uses quantitative indexes toengages an external asset manager to discuss appropriate

identify investees whose performance could become worse

measures for improvement.

in the future, and assesses and analyzes their valuation and

GPIF has put in place a scheme like the above tobackground factors including the external environment that

address deteriorating performance at an early stage.

<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

Typical items common to
traditional assets
Department for
GPIF’s entire
portfolio risk
management

Market risk
Liquidity risk
Credit risk
Country risk, etc.
For details, refer to page 36 ”3 Basic Policy ofPortfolio Risk Management”

Checks&Balances

Entire portfolio risks

Collaboration

Typical items specific toalternative assets

Alternative
investment
specific risks

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

Private Market
Investment
Department(risk management)

Information
Sharing· Continuous monitoring ofvarious risk items andqualitative changes such asorganizational changes of asset
managers

Expertise of asset managers specific toasset class(Changes in managers’ expertise on
investment decision-making)
Organizational stability suitable forlong-term investment(Revision of management organization anddeviation from predetermined investment
process)
Validity of fair value measurement, etc.
(Changes in investee’s valuation andverification methods)
Continuity of the business environment(Changes in legal and regulatory frameworks
that could affect future cash flows of assets
held)
Examples of risk events are shown inparentheses.
(Note) Above items are especially critical foralternative investments with lower liquidity.

(Note) With respect to the basic policy of GPIF’s entire portfolio risk managements including alternative assets, refer to page 36-40.

57

Investment Results in Fiscal 2020

5 Investment in Alternative Assets(Column) Impacts of COVID-19 on alternative investment
The global pandemic of COVID-19 since the beginning of 2020 has affected alternative investments in different ways.
sector, it has been commonly seen that restrictions on people’s movement have heavily affected the traffic, tourism, andcommercial industries, while a positive contribution has been observed in the sophistication and growth of the logistics

Chapter 1

The following refers to how the three asset classes in which GPIF invests have been affected. Looking at the trends byindustries driven by e-commerce expansion, as well as in the growth of telecommunication-related businesses on theback of increasing demand for data communication. Yet, the overall impact has been limited by the effect of diversifying
alternative investment portfolio in terms of geographic regions and sectors in each asset class. However, the pace ofrecovery of market prices is still moderate in alternative assets, compared with the developments in the financial
markets, including a sharp rise in stock markets on the back of the fiscal measures taken by various countries tomitigate a negative impact of the pandemic on business and employment and of the monetary policies taken by
central banks.
As is described in “

Changes in market value of investees” of “(Column) Analysis on changes in market value infiscal 2020” on page 46, the overall market value of investees in the alternative assets increased during the year from
April 2020 to March 2021. GPIF will strive continually to diversify the portfolio and devote its attention to identifying risks
in the portfolio, while assessing their impact carefully.
Infrastructure
Due to the restrictions on people’s movement, the number of passengers has sharply decreased in some transportation
sectors including airports. However, logistics demand is showing a sign of recovery, following its temporary drops at the
beginning of the pandemic. Among the companies in the transportation sector, earnings of port facilities that are
essential and irreplaceable for large-scale mass logistics are improving. On the other hand, the spread of remote workand restrictions on going out resulted in an increase in telecommunication demand, leading to a rise in the value of data
centers and other companies in the telecommunication sector. Demand is also robust in sectors essential to daily life,
such as electricity, gas and water distribution business. Earnings in the renewable energy sector which is expected toenjoy stable revenue based on long-term contracts continued has to be steady, without being affected by COVID-19.
GPIF’s portfolio is diversified across a wide range of sectors, and the overall value of the portfolio including dividends
is maintained at a level exceeding the amount invested.
Private equity
The retail trade sector and tourism sector were heavily affected by the lockdowns imposed in urban areas. In contrast,
plenty of favorable opportunities were generated by companies in the technology sector, such as software companies
and online service providers, due to the advancement of digitalization. As a result, investment strategies such as
venture capital and growth equity that are heavily exposed to the technology sector were relatively less affected by the
COVID-19 pandemic and enjoyed favorable investment performance toward the latter half of fiscal 2020.
The portfolio of GPIF’s PE investment, especially in emerging countries in which GPIF started investing ahead ofother countries, also saw a temporary decline in the investment performance in the beginning of fiscal 2020, but later
turned on a recovery trend smoothly.
Real estate
Heavily affected were retail properties including those targeting inbound demand. Tenants who were temporarily forced
to shut down their business or shorten working hours due to lockdowns, etc. called for a reduction or postponement of
their rent payments. But in some areas where lockdowns were lifted, business has been gradually turning to a recovery
trend with sales picking up. On the other hand, major progress was made by e-commerce, represented by online
shopping, with stronger demand for a supportive infrastructure to be provided by new logistics facilities.
GPIF has built a portfolio diversified over regions and the real estate sector. Although the portfolio’s return
temporarily declined due to the slowdown of the rate of operation in the first half of fiscal 2020, the market value of theoverall portfolio including dividends is maintained at a level above the amount of capital invested.

58

Investment Results in Fiscal 2020

6

6 Stewardship Responsibilities

Stewardship Responsibilities[1] Objectives and significance of stewardship activities
In its Investment Principles and the Code of Conduct,of as long as 100 years) to bridge the intergenerational gap

GPIF stipulates that we promote activities to fulfill ourof contribution, it is essential for GPIF to minimize negative

stewardship responsibilities

externalities of corporate and government activities(Note)(hereinafter “stewardship

activities”) with the objectives of appropriately fulfilling our(environmental and social issues, etc.) and to promoteresponsibilities to pension beneficiaries, as their fiduciary,

steady and sustainable growth of the overall capital market

and increasing investment returns over the long term. The

as well as its underlying society. Except for some

Investment Principles were partially amended in October

investment products, GPIF makes daily transactions and2017 to stipulate that ESG (environmental, social andinvestments, and exercises voting rights, via external asset

governance) factors should be taken into consideration in

managers. Therefore, GPIF, as a universal owner and a

stewardship activities.

cross-generational investor, contributes to the sustainablegrowth of the overall capital markets and promotes

As illustrated below, GPIF assumes stewardship
responsibilities to pension beneficiaries, while external asset

constructive dialogues (engagement) in consideration ofmanagers entrusted with investment by GPIF assume

ESG factors that contribute to sustainable growth between

stewardship responsibilities to GPIF.

external asset managers and investee companies/issuers.
Improvement of long-term corporate value would lead to“Universal owner” and “cross-generational investor” arethe key terms for GPIF to fulfill our stewardshipthe growth of the overall economy, which will eventually

responsibilities appropriately. As a “universal owner” (anenhance our investment returns. GPIF shall fulfill ourinvestor with a very large fund size and a widely diversified

stewardship responsibilities by promoting engagement andportfolio) and a “cross-generational investor” (responsiblebuilding a win-win environment in the investment chain.

for supporting pension finance with an investment horizon(Note) Institutional investors have stewardship responsibilities to enhance the medium- to long-term return on investments for their clients and beneficiaries byimproving and fostering investee companies’ corporate value and sustainable growth. They can do this through constructive engagement, or purposeful
dialogue, based on in-depth knowledge of the companies and their business environment and consideration of sustainability (medium- to long-termsustainability including ESG factors) consistent with their investment management strategies.

Government Pension Investment Fund, Japan (GPIF)

Fiduciary duty
Stewardship responsibility

Contribute premiums

Entrust funds(via Pension Special Account)

Fiduciary duty
Stewardship responsibility

IR(Investor Relations)Improve long-term returns

EmployerPensionbeneficiary(For listed companies)

Engagement

External asset
manager

Corporate governance code

Company

Stewardship code

Stewardship
activities

Enhance long-term corporate value

Sustainable growth of the economy[2] Stewardship activities fundamentals and progress

59

GPIF implemented stewardship activities on a full-scale

Investment Principles, which lay down its guiding principle

basis following the adoption of Japan’s Stewardship Codethat GPIF is committed to increasing investment returns

in May 2014. In March 2015, GPIF formulated theover the long term for pension beneficiaries by conducting

Investment Results in Fiscal 2020

6 Stewardship Responsibilities

ensure that the reserves are managed and invested safely

equity investment. In September 2015, GPIF signed theand efficiently from a long-term perspective” (“Basic Policy

Principles for Responsible Investment (PRI) introduced byof Reserves”) and the fourth Medium-term Plan, thethe United Nations, as part of GPIF’s efforts to enhance

Investment Principles were revised again in April 2020.

ESG implementation. In October 2017, GPIF revised the

GPIF’s stewardship activities are conducted in line with

Investment Principles to expand the scope of stewardshipthe Investment Principles and the Policy to Fulfill

activities to cover all asset classes, as it had been focused

Stewardship Responsibilities, and they require external

on equity investment, and made it clear that ESG factors

asset managers to comply with Stewardship Principles

should be considered in conducting stewardship activities.

and Proxy Voting Principles.

Chapter 1

various activities to fulfill its stewardship responsibilities in

Following the revision of “the basic policy that is meant to2014−152016−172018−192020−21

May 2014
Accepted Japan’s Stewardship
Code.

July 2016
Established “Business and Asset Owners’
Forum” and “Global Asset Owners’ Forum.”

November 2019
Partial revision to “Policy to Fulfill
Stewardship Responsibilities.”

February 2020
Partial revisions to “Stewardship Principles”
and “Proxy Voting Principles”

Established “Policy to Fulfill
Stewardship Responsibilities.”

Exchange of opinions on stewardship, ESG, etc.

Focused on prevention of activities
that impede long-term corporate
growth to achieve sustainable growthof the overall markets.
Contribute to sustainable growth ofmarkets.

Requested compliance from managers of all
domestic and foreign assets.

March 2015
Established “Investment
Principles.”Stewardship activities inequity investment.

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

June 2017
Established “Stewardship Principles”
and “Proxy Voting Principles.”Requested compliance from asset managers forequity investment.

April 2020
Partial revisions to “Investment Principles”
Following the revision of Basic Policy of Reserves,
stipulate sustainability of investee companies andthe overall markets and considerations of ESG
investment

August 2017
Agreed to the revised Japan’s Stewardship
Code

June 2020
Agreed to re-revised Japan’s Stewardship CodePartial revision to “Policy to Fulfill StewardshipResponsibilities.”

October 2017
Partial revision to “Investment Principles.”Stewardship activities including ESG-oriented
initiatives were expanded to all assets.

Expanded the scope of investment target fromequity to all types of assets
Clarified ESG considerations

Approval for the re-revised Japan’s Stewardship Code and Policy to Fulfill StewardshipResponsibilities
On March 24, 2020, Japan’s Stewardship Code was re-June 2020. As a major change in the Policy in line with therevised (hereinafter referred to as “re-revised Code”). The

Investment Principles, etc., GPIF expanded the scope ofrevision includes adding consideration to sustainability

investment target from equity to all types of assets. In

issues (including medium- to long-term sustainability ESG

addition, as a response to individual principles of the re-factors) in accordance with investment strategies to therevised Code, GPIF clarified ESG considerations anddefinitions of stewardship responsibilities, while allowing

required external asset managers to disclose the reason for

application to a wider range of assets in addition to

exercising voting rights if important or necessary. GPIF will

domestic listed equities. Following the revision, GPIF

continue to fulfill responsibilities as an asset owner in line

expressed its support for the re-revised Code, and partiallywith the Stewardship Code.

revised the Policy to Fulfill Stewardship Responsibilities in

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

circumstances of their own, the said manager is required toand the Proxy Voting Principles. The objective of these two

explain to GPIF the rationale behind the non-compliance. In

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

order to fulfill our own stewardship responsibilities, GPIF

owner, to clarify the requirements and principles thatappropriately monitors the stewardship activities of external

external asset managers should observe in conducting

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

proactively conducts dialogue (engagement) with them.

rights. GPIF requires external asset managers to comply

The Stewardship Principles are comprised of the following

with these principles, and if an asset manager should

five items.

decide not to comply with any of them due to60

Investment Results in Fiscal 2020

6 Stewardship Responsibilities<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

voting rights shall be made as a part of a constructive

for the first time to expand the scope of stewardshipdialogue throughout the year.

activities to cover all asset classes, as it had been focused

GPIF is founded on the Investment Principles, the Policy

on equity investment, and newly call for a collaboration of

to Fulfill Stewardship Responsibilities, the abovementioned

stewardship division and investment division at asset

Stewardship Principles, and Proxy Voting Principles. We will

managers, a constructive dialogue (engagement) with acontinuously examine appropriate stewardshipwide range of stakeholders such as index providers, andresponsibilities as a public pension fund and promote

active participation various ESG initiatives. Meanwhile, theactivities to fulfill our stewardship responsibilities.

Proxy Voting Principles made a reminder that an exercise ofParticipation in global initiatives
Starting with the signing up of PRI in September 2015,

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, we

asset managers.

Joined in October 2018

Signed in September 2015

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 climate change-related governance,
initiatives for the reduction of greenhouse gas emissions,the enhancement of information disclosure, etc.

Six principles advocated in 2006 by the late Mr. Annan,
then Secretary-General of the United Nations. It demands
institutional investors to include ESG in the investment
process.

GPIF, as an asset owner, has also joined its Asia Advisory Group, which
provides the steering committee with advice on the characteristics of the
Asian region.

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 Governance module in 2020
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, with theaim of achieving 30% female directors.

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

61

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

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

Investment Results in Fiscal 2020

6 Stewardship Responsibilities[3] Promotion of activities aimed at fulfilling stewardship responsibilities
Initiatives for the sustainable growth of the whole capital markets

Sustainable growth of the overall capital market is essential

companies. The purpose of the ESG Knowledge Hub isfor GPIF, as a “universal owner” and a “cross-generational

consistent with the significance of GPIF’s stewardshipinvestor” to secure its long-term investment returns. Since

activities that aim to promote engagement between

GPIF is not allowed to conduct in-house investment inexternal asset managers and investee companies inequities by law, it screens investee companies andconsideration of ESG factors that may contribute toexercises voting rights via external asset managers.

sustainable growth. GPIF believes that further ESG

Therefore, it encourages to engage in constructive dialogue

disclosure by listed companies in Japan would also

between external asset managers and investee companies.

contribute to raising the level of Japan’s stock market, andTo conduct efficient dialogue, disclosure is considered

has been an “ESG Knowledge Hub Supporter,” as one ofimportant for both parties. The higher the importance ofqualified institutional investors and related parties since thenon-financial information becomes, the more important theplatform was established. (Initially, the Hub was participateddisclosure of ESG information will be.

in by 28 institutional investors and related parties from both

JPX ESG Knowledge Hub is a platform established by
JPX in November 2020 with the objective of supporting
listed companies’ ESG disclosure, and providing listed

Chapter 1

A. Participation in JPX ESG Knowledge Hubinside Japan and overseas, including Japan’s national
ministries).
GPIF will also utilize JPX ESG Knowledge Hub ascompanies with access to a variety of ESG investment-

another means to transmit information with further

related information that can deepen their understanding oftransparency and understanding of stewardship activities

ESG investment in one place. JPX plans to build the ESG

and the ESG initiatives it conducts.

Knowledge Hub into a platform connecting investors and
B. Passive management with stronger commitment to engagement
About 90% of GPIF’s equity investments are passivemodel that attaches importance to stewardship, in specificinvestments in a wide range of listed companies. Therefore,terms, a business model that unifies the investment processsince long-term growth of the overall capital market isand a policy of stewardship activities, together with anessential for GPIF to secure further investment returns, weorganizational structure and fee levels employed to put

believe that, in passive management, it is important tothem into practice.

increase long-term corporate value of investee companies

As a result, as an example of passive management

and, in particular, conduct engagement activities tomodels that attach importance to stewardship, Assetpromote sustainable growth of the overall capital market

Management One Co., Ltd. and FIL Investments (Japan)

from a long-term perspective. GPIF itself is not allowed toLimited were newly selected as a “passive investment

engage with companies, and needs equity passive

manager with stronger commitment to engagement” ininvestment managers to continue to do so, taking the2018. Since the fee level employed by these two asset

above the viewpoint into account. Moreover, themanagers is different from that of a general passive

Stewardship Code stipulates that both institutional investors

investment manager, GPIF checks the status ofand clients/beneficiaries should recognize that anachievement of KPIs to measure the success ofappropriate amount of costs associated with stewardshipengagement plans and verify and evaluate the milestones

activities is an indispensable element in asset management.

for the next year to determine whether to renew the asset

GPIF has come to the conclusion that domestic equity

management contract on an annual basis. Many of thepassive managers need to have an environment that allows

engagement issues that reached a solution werethem to continue conducting stewardship activities andgovernance-related issues until 2020, but especially duringcontinue promoting engagement with companies in a

the past year, progress was made in some businessdeeper, and more sophisticated way. For this reason, whenstrategy-related issues, and solutions were found in more

appointing domestic equity passive managers, GPIF has

types of issues, such as ESG issues including CSR/ESG

decided to assess and select a passive management

management and CSR procurement.

62

Investment Results in Fiscal 2020

6 Stewardship Responsibilities

Selection focuses on the following points:

engagement has been mutually promoted by a company

Appropriate KPIs are set

and an external asset manager in some cases, creating a- Goals for medium- to long-term engagement activities

virtuous cycle. An expert review meeting held on theare setrevision of the Stewardship Code in 2020 pointed out in the- Annual plan for achievement (milestone) is set

discussion that the method of enriching engagement must

Engagement structure and approach

be examined amid the spread of passive investment. We- Organizational structure and a person responsible for

expect that external asset managers will continue to

stewardship activities

propose a model that helps raise the level of the overall- Engagement approach

capital market through stewardship activities and that

Engagement is progressing steadily thanks to thediversifies and strengthens the approaches to stewardshipcommitment of external asset managers, and continuous

activities.

Other activities for enhancing investment chain
In order to build the investment chain so that the return for

exchanged with asset owners from abroad. In the same

pension beneficiaries can be increased over the long term,

year, GPIF also started conducting a survey of listed

GPIF has held two forums since 2016: the Business andcompanies on institutional investors’ stewardship activities

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

for the purpose of confirming how their stewardshipthe former, opinions from companies can be collected on a

activities including constructive dialogue (engagement) areregular basis, whereby in the latter, opinions can bebeing received by investee companies.

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

opportunity to listen to companies’ voices is very useful for

in January 2016, many companies requested meetings withGPIF to fulfill our stewardship responsibilities. GPIF feeds

asset owners. As a result, GPIF has been holding meetingsback companies’ opinions to asset managers and overseas

with those companies on a regular basis. Furthermore,

asset owners as well so that we can contribute to improveseveral companies proposed the establishment of a regularand optimize the whole investment chain.

platform for the constructive exchange of opinions between

The Global Asset Owners’ Forum was established as acompanies and GPIF, as an asset owner. In response, theplatform for the continual exchange of opinions, aiming tofirst Business and Asset Owners’ Forum was held on

mutually share insight with overseas public pension funds,

September 1, 2016 by three co-organizers. The forum was

etc. for further fulfillment of stewardship responsibilities. The

held again from April 2019, with the participation of 10

first meeting was held in Tokyo in November 2016. The

companies in total, including the three co-organizers.

forum has been held five times so far, co-organized by

The forum for fiscal 2020 was postponed due to the

GPIF, CalPERS, and CalSTRS. However, the 2020 meeting

COVID-19 pandemic. However, GPIF continues to hold thehas also been postponed due to the COVID-19 pandemic

Business and Asset Owners’ Forum, as we believe theand will hopefully be held during fiscal 2021.

B. Conducting a Survey of Listed Companies regarding Institutional Investors’ stewardship activities<Objective of the survey>

63

As GPIF entrusts domestic equity investment of the pension

activities of asset managers. In fiscal 2020, GPIF conducted

reserves to external asset managers, it requests them tothe sixth survey, by sending questionnaires to the Firstenhance their stewardship activities. To ascertain how

Section of the TSE-listed 2,186 companies* for the purpose

investee companies receive asset managers’ stewardshipof assessing stewardship activities and “constructive

activities, including engagement, GPIF conducted the first

dialogue (engagement)” of asset managers as well as“Survey of Listed Companies regarding Institutional

understanding any changes during the year since theInvestors’ Stewardship Activities” in 2016, of JPX Nikkei

previous survey. 681 companies responded (accounting forIndex 400 companies. The purpose of this survey to listed

31.2%).

companies is to examine the validity of the stewardship* The number of companies is as of December 30, 2020.

Investment Results in Fiscal 2020

6 Stewardship Responsibilities<Summary of the results of the survey>
respondent companies. The theme with the largest increasethat there had been positive changes to the attitudes ofin response rate from the previous survey was “climate

institutional investors at IR meetings, etc. over the pastchange” (up 9.7%), unchanged from the previous survey,

year. The results of the questionnaire show thefollowed by “health and safety” (up 8.0% from the previous

enhancement of companies’ non-financial information

survey). In addition to governance (G), there is growing

disclosure including ESG information, new disclosureinterest in a wide range of ESG themes, from theinitiatives such as TCFD, and SDGs recognized by all theenvironment (E), which is typically associated with climate

respondent companies. The results have also shown thatchange, to society (S), which seems to reflect the impact ofcompanies have perceived positive changes in investors’

new coronavirus infections. Many companies expect GPIF

interest in and utilization of non-financial information. And

to: (i) promote constructive dialogue from a medium- to“corporate governance” continues to be listed as the mostlong-term perspective; (ii) promote ESG investment; (iii)

important theme of corporate ESG activities, carrying on

increase the opportunities for dialogue that will involve small

from the previous survey, being pointed out by 71.7% of thecap companies; and (iv) continue disclosure.
Response rate by company size

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

84.8

Large-cap

79.0

681

companies

30.2%

Chapter 1

Of the survey respondents, nearly 50 percent answered

64.1

Medium-cap

31.2%

63.8

Responded

20.2

Small-cap

No response

0

1,505 companies
68.8%

This survey
Previous survey

19.8
20

40

60

80

100
(%)

69.8%

Institutional investors utilization of integrated reports
61.7This survey

35.8

50.0

Previous survey

46.3

39.4

The survey before last

0

20

2.5
3.7

52.9
40

60

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

7.7
80

100
(%)

[4] Material ESG issues recognized by external asset managers
Material ESG issues recognized by external equity

out supply chain as a materiality issue increased, and all

managers are as follows. GPIF found that all passive

passive equities listed this as a serious issue. This indicatesmanagers that keep holding investees’ stocks recognize

that, amid the global COVID-19 pandemic, supply chains“Disclosure”, “Climate Change”, “Diversity”, and “Supply

have been recognized as a critical issue. Regarding active

Chain” as material ESG issues and tend to regard long-term

managers with a primary holding period of approximately

issues including “E” (environmental) and “S” (social) as

several months to a few years, different ESG issues wereparticularly critical. The change from the previous year wasrecognized as material depending on whether they are

outstanding in “Supply chain”. The percentage of bothmanagers for domestic equities or foreign equities. GPIF

domestic and passive foreign equity managers who pointed

found that material issues recognized by active managers

64

Investment Results in Fiscal 2020

6 Stewardship Responsibilities

for domestic equities has expanded to include “E”

common awareness has been formed among both(environmental) and “S” (social), in addition to “G”

investors and companies that “G” (governance) is a(governance), but all active managers for domestic equities

necessary framework to ensure the resolution of long-termsee “Board Structure, Self-evaluation”, “Minority

issues including “E” (environmental) and “S” (social) such as

Shareholder Rights”, and other “G” (governance) issues asclimate change, and to improve companies’ sustainable

more critical. In the survey of listed companies, corporate

growth and corporate value over the long term. GPIF’s

governance was the most common theme of ESG activities

Stewardship Principles require proactive engagement inof Japanese companies. Taking TCFD recommendations,material ESG issues to external asset managers.

which GPIF supports, for example, companies are required

The survey was also answered by external bondto disclose information on their recognition and analysis on,

managers for the first time. What they consider to be a

climate change-related risks and opportunities, as well as

significant ESG issue from a corporate bond investor

strategies for this issue, and management framework

perspective are as follows:(governance) for its implementation. It shows that a<Passive domestic equity><Active domestic equity><Passive foreign equity><Active foreign equity>

Climate Change

100%

Board Structure,Self-evaluation

Climate Change

100%

Climate Change

100%

Disclosure

100%

Climate Change

95%

Misconduct

100%

Minority100%
Shareholder Rights

Disclosure

100%

Other (Social)

86%

Climate Change

89%

Health and Safety67%

Disclosure

100%

Capital Efficiency

89%

Supply Chain

100%

Health and Safety86%

Corporate
Governance

67%

Board Structure,Self-evaluation

57%

Supply Chain

100%

Misconduct

89%

Diversity100%

Human Rights &Community86%

Board Structure,Self-evaluation

56%

Human Rights &Community

57%

Diversity

100%

Disclosure

89%

Corporate
Governance75%

Corporate
Governance86%

Health and Safety

56%

Corporate
Governance

52%

Board Structure,Self-evaluation

83%

Supply Chain

89%

Other (Social)

75%

Disclosure86%

Supply Chain

52%

Minority
Shareholder Rights

83%

Diversity

78%

Health and Safety

75%

Diversity

71%

Diversity

52%

Capital Efficiency

83%

Environmental
Opportunities

78%

Board Structure,Self-evaluation

75%

Social Opportunities

71%

Pollution &Resources

52%

Corporate
Governance83%

Climate Change

67%

Other (Governance)

75%

Labor Standards

71%

Disclosure

52%

Environmental
Opportunities

67%

Corporate
Governance

67%

Water Stress, Water
Security75%

Board Structure,Self-evaluation

71%

Product Liability

52%

Health and Safety

67%

Health and Safety

67%

Risk Management75%

Minority
Shareholder Rights

71%

Waste Management

52%

Human Rights &Community

67%

Human Rights &Community

67%

Deforestation75%

Supply Chain

71%

Labor Standards

52%

Other (Social)

67%

Pollution &Resources

67%

Environmental
Opportunities

71%

Water Stress, Water
Security

67%

Product Liability

67%

Product Liability

57%

Biodiversity

67%

Waste Management

67%

Other (Governance)

57%

Anti-Corruption

67%

Labor Standards

67%

Capital Efficiency

57%

Deforestation

67%

Other (Social)

56%

Anti-Corruption

57%

Other (Governance)

56%

Other (ESG)

57%

Other
(Environmental)

56%

Water Stress,
Water Security

57%

Social Opportunities

56%

Pollution &Resources

57%

100%

<Domestic bond><Foreign bond>…E (Environmental)…S (Social)…G (Governance)…Duplicated ESG themes(Note 1) A survey on external asset managers for equities and bonds was conducted in December 2020.
(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 numberof external 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.

65

Investment Results in Fiscal 2020

6 Stewardship Responsibilities[5] Exercise of voting rights
Concept of exercise of voting rights
Chapter 1

The Medium-term Objectives established by the Minister of(environmental, social and governance) materiality that

Health, Labour and Welfare stipulate that GPIF “should takeleads to long-term investment returns. When doing so,

appropriate measures including exercise of voting rights

GPIF shall clarify that stewardship activities including thewhile giving due consideration to influence on corporate

exercise of voting rights by our external asset managers

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

aim to improve long-term investment returns solely for thestates, “GPIF itself does not exercise voting rights andpension beneficiaries”.
External asset managers submit the guideline for voting

instead entrusts the external asset managers with theexercise of voting rights so as to avoid giving a direct

and annually report voting results to GPIF. GPIF holds

influence on corporate management. However, from themeetings with the managers on the results, and evaluates

viewpoint of further promoting its stewardship activities,

the way in which a manager exercises voting rights in the

GPIF shall conduct efficient engagement when entrusting

annual assessment meeting, considering their exercise as

an external asset manager, with an awareness of ESG

an item of initiatives for fulfilling stewardship activities.

Exercise of voting rights in fiscal 2020
GPIF held meetings based on the reports on the status offor the exercise of voting rights”, “organizational

exercise of voting rights from April to June 2020. Then, we

framework”, and “the status of exercise of voting rights”.

evaluated asset managers based on the reports and the

As a result, we confirmed that voting rights weremeetings from the viewpoints of “establishing of guidelines

appropriately exercised.

The status of exercise of voting rights by external asset managers for domestic equities (from April 2020 to March 2021)
Number of external asset managers who exercised voting rights: 36 funds
Number of external asset managers who did not exercise voting rights: none
(Unit: No. of proposals, percentage)
Proposals pertaining to capitalmanagement (excluding items
pertaining to amendment of thearticles of incorporation)

Proposals pertaining to director
remuneration, etc.

Proposals pertaining to company organization
ProposalAppointment
of directors

Shareholder proposals

Management proposals

Number of
voting rights
exercised
Total
Approved
Opposed
Total
Approved
Opposed182,213External
directors

63,022

Appointmentof auditors

24,182

AppointmentofDirectoraccounting remuneration
auditors

External
auditors

16,268535

5,972

Director
bonuses

Director
retirement
benefits

Grantingof stock
options

Dividends

Acquisitionof treasury
stock

1,496

1,279

994

15,26843

Proposals
pertaining toamendmentof the articles
Mergers,ofacquisition,
incorporation
etc.
691

6,403

Poison Pills(Rights plan)

Other
proposals

Warning
type

Trust–type

739

0

304

Total

240,119

181,22962,53924,155

16,250

535

5,955

1,496

1,279

994

15,196

0

691

4,795

739

0

250

237,314(100.0%)(100.0%)(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%)

158,01354,481

20,86013,068

529

5,558

1,294

262

744

14,985

0

678

4,633

27

0

211

207,794(87.2%)(87.1%)(86.4%)(80.4%)(98.9%)(93.3%)(86.5%)(20.5%)(74.8%)(98.6%)(0.0%)(98.1%)(96.6%)(3.7%)(0.0%)(84.4%)(87.6%)

23,216

8,058

3,295

3,182

6

397

202

1,017

250

211

0

13

162

712

0

39

29,520(12.8%)(12.9%)(13.6%)(19.6%)(1.1%)(6.7%)(13.5%)(79.5%)(25.2%)(1.4%)(0.0%)(1.9%)(3.4%)(96.3%)(0.0%)(15.6%)(12.4%)

984

483

27

18

0

17

0

0

0

72

43

0

1,608

0

0

54

2,805

(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

82

0

0

0

0

0

0

0

10

10

0

155

0

0

24

360

(16.4%)(17.0%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(13.9%)(23.3%)(0.0%)(9.6%)(0.0%)(0.0%)(44.4%)(12.8%)

823

401

27

18

0

17

0

0

0

62

33

0

1,453

0

0

30

2,445

(83.6%)(83.0%)(100.0%)(100.0%)(0.0%)(100.0%)(0.0%)(0.0%)(0.0%)(86.1%)(76.7%)(0.0%)(90.4%)(0.0%)(0.0%)(55.6%)(87.2%)(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 37 abstentions.

66

Investment Results in Fiscal 2020

6 Stewardship Responsibilities

The status of exercise of voting rights by external asset managers for foreign equities (from April 2020 to March 2021)
Number of external asset managers who exercised voting rights: 19 funds
Number of external asset managers who did not exercise voting rights: none
(Unit: No. of proposals, percentage)
Proposals pertaining to company
organization

Proposals pertaining to director
remuneration, etc.

ProposalAppointment of Appointment of
directors
auditors

Shareholder proposals

Management proposals

Number of
voting rights
exercised
Total
Approved
Opposed
Total
Approved
Opposed90,7004,596

Appointment of
Directoraccounting
remuneration
auditors
10,678

Director
bonuses

21,598202

Director
retirement
benefits

Granting ofstock
options

203

4,923

Proposals pertaining to capital
Proposalsmanagement (excluding items
pertaining to amendment of the articles pertaining to Poison Pills
amendment of for warningof incorporation)
the articles oftypeMergers,
Acquisition ofincorporation
Dividends
acquisition,
treasury stock

8,448

etc.

4,552

11,327238

Total
Approval of
financialstatement, etc.
11,182

Other
proposals

40,369219,654

89,481

4,018

10,59521,305

201

202

4,894

8,428

4,552

11,304

10,067236

11,18237,005

213,470(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%)75,649

3,411

9,922

17,996

170

154

3,371

8,177

4,360

9,419

9,026

200

10,706

31,289183,850(84.5%)(84.9%)(93.6%)(84.5%)(84.6%)(76.2%)(68.9%)(97.0%)(95.8%)(83.3%)(89.7%)(84.7%)(95.7%)(84.6%)(86.1%)

13,832

607

673

3,309

31

48

1,523

251

192

1,885

1,041

36

476

5,716

29,620(15.5%)(15.1%)(6.4%)(15.5%)(15.4%)(23.8%)(31.1%)(3.0%)(4.2%)(16.7%)(10.3%)(15.3%)(4.3%)(15.4%)(13.9%)

1,219

578

83

293

1

1

29

20

0

23

571

2

0

3,364

6,184

(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%)

788

445

69

93

1

0

10

8

0

16

126

2

0

1,358

2,916

(64.6%)(77.0%)(83.1%)(31.7%)(100.0%)(0.0%)(34.5%)(40.0%)(0.0%)(69.6%)(22.1%)(100.0%)(0.0%)(40.4%)(47.2%)

431

133

14

200

0

1

19

12

0

7

445

0

0

2,006

3,268

(35.4%)(23.0%)(16.9%)(68.3%)(0.0%)(100.0%)(65.5%)(60.0%)(0.0%)(30.4%)(77.9%)(0.0%)(0.0%)(59.6%)(52.8%)(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 2,329 abstentions.

67

10,638Other proposals

Investment Results in Fiscal 2020

7

7 ESG Activities

ESG Activities
Chapter 1[ 1 ] B a s i c a p p ro a c h

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 reduceinvestment, referring to an investor with a well-diversified

negative externalities such as environmental and social

portfolio that largely represents the world’s capitalissues, and to improve the sustainable return from themarket. GPIF is a typical “universal owner” with a broadly

whole assets, as GPIF is a “Universal owner” and “Cross-diversified portfolio comprised of equities and bonds of thegenerational investor”. “Universal owner” is a term often

majorities of Japanese listed companies and major foreign

used in relation to pension management and ESG

companies.

The number of securities owned by GPIF (as of the end of March 2021)
3,500

3,285

(The number of securities)

3,000
2,500

2,187

2,417

2,207

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

great benefits for GPIF to integrate ESG factors into its

companies increase as a result of conducting business

investment process as a cross-generational investor

activities without paying attention to their large impacts

responsible for supporting pension finance designedon the environment and society for the sake of short-with time horizon of as long as 100 years. That is to say,term revenue expansion, and society and the economy

conducting ESG activities in order to reduce negative

as a whole, including other companies, are negatively

externalities such as environmental and social issues, andaffected by such activities, the overall portfolio of ato improve the sustainable return from the whole assets isuniversal owner will be significantly impaired. In otherconsistent with the objective of the Employees’ Pension

words, the sustainability of the capital market and society

Insurance Act and the National Pension Act to “manage

is a prerequisite for the sustainability of universal owners’

pension reserves safely and efficiently from a long-term

portfolios. The “universal ownership”, the concept thatperspective solely for the pension beneficiaries”, and GPIF

universal owners conduct ESG activities proactively tocontinues promoting ESG activities proactively.

control and minimize such negative externalities—lies

GPIF conducts ESG activities not only for equities

at the core of GPIF’s ESG investment. In addition, thebut also for other asset classes, including bonds andlonger the ESG risks persist, the more likely it is thatalternative assets.

they will materialize. Therefore, we consider that it has
68

Investment Results in Fiscal 2020

7 ESG Activities

GPIF shall manage pension reserves in line with the

Evaluation of ESG promotion activities requires thebasic policy that is meant to ensure that the reserves arefollowing perspectives: 1) it takes a long period of time formanaged and invested safely and efficiently from a long-the effects of ESG investment to materialize; and 2) ESG

term perspective (hereinafter referred to as the “Basic

investment is also aimed at improving the sustainability

Policy of Reserves”) announced in accordance with theof the entire capital market. These perspectives are

Employees’ Pension Insurance Act. The Basic Policy

different from general investment evaluation of how muchof Reserves was revised in February 2020, stipulating

investment returns are generated over a certain period.

that the sustainability of investee companies and the

In order to evaluate these ESG initiatives to confirm theoverall markets will be critical for the improvement ofeffect of investment while ensuring the transparency, GPIF

long-term investment returns in the management ofhas published the ESG Report since 2018. In 2020, we

pension reserves. It also stipulates that the reserve funds

published ESG Report 2019, the third issue. GPIF expressedshall implement the necessary initiatives by individually

its support for the declaration of the Task Force on Climate-examining the promotion of investments that consider

related Financial Disclosures (TCFD) in 2018, and has

ESG (environmental, social and governance) as non-published the ESG Report including a disclosure in line withfinancial factors in addition to financial factors, from thethe TCFD recommendations, starting from ESG Reportviewpoint of securing long-term investment returns for2018. In ESG Report 2019, GPIF’s TCFD disclosure was

the interest of pension beneficiaries, adding provisions onenriched further (Note). GPIF will continue verifying the effect ofspecific ESG considerations (applicable from April 2020).

its ESG initiatives to improve its ESG-related activities.
(Note) For details, refer to “(Column) Disclosure related to climate change”.

Expansion of
ESG investment(Investment opportunity
at low cost)

Improving thesoundness of pension
finance

Building
sustainable
society

Improvement ofrisk-adjusted returns

69

Increasing
incentives to enhance theresponse to ESG
by companies

Improvement of the
ESG evaluation ofcompanies

Investment Results in Fiscal 2020

7 ESG Activities(Column) Disclosure related to climate change
On the back of growing interest in climate change issues, the G20 Summit held in 2015 asked the Financial
In response, the TCFD, established by the FSB in the same year, revealed its recommendations to promotecompanies’ better disclosure of climate-related risks and opportunities in 2017. As of the end of March 2021,

Chapter 1

Stability Board (FSB) to examine how the financial sector should take climate change risks into consideration.

more than 1,900 financial institutions and companies in over 78 countries expressed their support for
the recommendations.
We have also reported disclosure based on the TCFD recommendations since 2019. In fiscal 2018, in
connection with our portfolio, we analyzed transition risk (including policy risk) arising from the implementation ofclimate change measures. In fiscal 2019, in addition to transition risk, we also analyzed physical risk associatedwith the increase in extreme weather caused by climate change, as well as new business opportunities associatedwith climate change. The summary of the analysis was presented in ESG Report 2019 and details were released
as Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio published as a supplementary
guide to the report. The analysis suggested that, if measures to achieve the Paris Agreement target adopted
by COP21 in 2015, to keep the temperature rise below 2 degrees Celsius above preindustrial levels until theend of this century, were implemented, the corporate value of domestic equities could particularly exceed theimplementation cost.
(Note) “ESG Report 2019” and “Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio”, refer to GPIF’s
website at https://www.gpif.go.jp/en/investment/esg/.

70

Investment Results in Fiscal 2020

7 ESG Activities[2] Passive investment based on ESG indexes
In fiscal 2017, GPIF selected two integrated indexes andand conducted due diligence on the index companies. As a

one thematic index focused on gender diversity forresult, we selected the following two indexes, based on

domestic equities, and commenced passive investment

which we started passive management of foreign equities.

tracking those indexes. The selection criteria for the ESG

The size of assets managed based on the ESG indexes as

indexes included economic rationality based on the risk-of the end of fiscal 2020 was approximately ¥10.6 trillion.

return profile of each index and the possibility of theseindexes to boost the equity market in Japan throughimprovement of ESG evaluation.
In fiscal 2018, with climate change increasingly

Theme

Index name

General ESG

MSCI ACWI ESG Universal Index (Note1)

Diversity

Morningstar Gender Diversity Index (“GenDi”) (Note2)(Note1) Official name: MSCI ACWI ex Japan ex China A ESG Universal with
Special Taxes Index(Note2) Official name: Morningstar Developed Markets (ex Japan) Gender
Diversity Index

becoming serious, GPIF selected the S&P/JPX Carbon
Efficient Index for Japanese equities and the S&P Global
Ex-Japan Large Midcap Carbon Efficient Index forforeign equities. These are stock indexes designed to(Primary evaluation criteria)

measure the carbon efficiency of companies① ESG ratings play a central role in the constituent
selection/weighting process(greenhouse gas emissions divided by revenues) in theindexes and GPIF commenced passive investment② The index encourages ESG disclosure (i.e. ratings are
based on public information)

tracking those indexes.
Moreover, in fiscal 2019, GPIF announced the launch of③ The ratings methodology is clearly disclosed and theindex provider/ESG ratings agency actively engages

the “Index Posting System” (IPS)−a new framework forcollecting index information on a continuous basis−in orderin dialogue with issuers

to efficiently gather various index information for the④ The scope of issuers rated is sufficiently broad⑤ The governance and conflict of interest management

purpose of enhancing our overall fund management. IPS
has started collecting information.

structures of the ESG ratings agency and index

In fiscal 2020, the Board of Governors deliberated andprovider are adequate

passed a resolution concerning the "Practical Guidelines
for the Selection of ESG Indexes" which provides the basic

We hope that these ESG indexes will serve as anpolicy for selecting ESG indexes.

incentive for various companies to introduce ESG into

Among the indexes posted, we examined in fiscal 2020

corporate management, and eventually improve

the ESG composite indexes and diversity indexes based on

corporate value in the long run.

the "Practical Guidelines for the Selection of ESG Indexes"

List of selected ESG indexes
Integrated indexes

FTSE Blossom
Japan Index

MSCI JapanESG Select

Thematic indexes

E

S&P/JPX
Carbon EfficientIndex Series

S

MSCI Japan Empowering
Women Index (WIN)G

Morningstar Gender
Diversity Index(GenDi)( Environmental )( Social )Leaders Index

MSCI ACWIESG Universal Index

71( Governance )Investment Results in Fiscal 2020

7 ESG Activities

ESG indexes for domestic equities
FTSE Blossom
Japan Index· The MSCI Japan ESG Select· The index uses the ESG
Leaders Index is a broad ESG
assessment scheme that isindex that integrates various
applied to the FTSE4Good Japan
Index Series which has one of the ESG risks into today's portfolio.
The index is based on MSCI ESG
longest track records globally for
Research that more than 1,000
ESG indexes.
clients use globally.
· The index is a broad ESG index· The index incorporates stocks
that selects stocks with highwith relatively high ESG scores inabsolute ESG scores and adjusts
each industry.
industry weights to neutral.

MSCI Japan Empowering
Women Index (WIN)S&P/JPX
CarbonEfficient
Index

Chapter 1

Index
concept

MSCI Japan ESG SelectLeaders Index· Based on carbon data provided· MSCI calculates the genderdiversity scores based on various by Trucost, one of the pioneers ofenvironmental research companies,
pieces of information disclosed
S&P Dow Jones Indexes, a leading
under “the Act on Promotion
independent provider, develops theof Women's Participation andindex methodologies.
Advancement in the Workplace”
and selects companies with· The indexes are designed to increase
higher gender diversity scoresindex weights of the companies
from each sector.
which have low Carbon to Revenue· The first index designed to cover
Footprints (annual greenhouse gas
a broad range of factors related to (GHG) emissions divided by annual
gender diversity.
revenues) and actively disclose
information of carbon emissions.

Index
construction

Best in classBest in classBest in class

Tilted (weight-adjusted)

Constituent
universe(parent index)

FTSE JAPAN ALL CAP INDEX[1,391 stocks]

MSCI JAPAN IMI TOP 700[694 stocks]

MSCI JAPAN IMI TOP 700[694 stocks]

TOPIX[2,187 stocks]

Number of index
constituents

200

231

298

1,844

Assets undermanagement¥1,490.6 billion¥2,026.8 billion¥1,236.2 billion¥1,536.5 billion

ESG indexes for foreign equities
MSCI ACWI ESG
Universal Index

Index
concept

S&P Global
Ex-Japan
LargeMidCap
CarbonEfficient Index

Morningstar Gender
Diversity Index(“GenDi”)

・The Morningstar Gender Diversity ・Based on carbon data provided
・One of MSCI’s flagship ESG
by Trucost, one of the pioneers
Index ("GenDi") determines
indexes, the MSCI ACWI ESG
of environmental research
Universal Index adjusts the weight investment weights primarily
companies, S&P Dow Jones
based on the Equileap Genderof constituents based on eachIndexes, a leading independent
Scorecard, which rates issuers'
issuer’s current ESG rating andprovider, develops the index
efforts in gender equality.
rating trend to elevate the ESG
methodologies.
metrics of the index overall.
・The Gender Scorecard rates
・The indexes are designed tocompanies across four broad
・The MSCI ACWI ESG Universal
increase index weights of thecategories: ①Gender BalanceIndex was developed for large
companies which have low
in Leadership & Workforce,
institutional investors seeking to
Carbon to Revenue Footprints②Equal Compensation &enhance ESG integration while(annual greenhouse gas (GHG)
Work-Life Balance, ③Politics
achieving the same level ofemissions divided by annual
Promoting Gender Equality andinvestment opportunity and risk
revenues) and actively disclose④Commitment, Transparency &exposure as the parent index.
information of carbon emissions.
Accountability.

Index
construction

Tilted (weight-adjusted)

Tilted (weight-adjusted)

Tilted (weight-adjusted)

Constituent
universe(parent index)

MSCI ACWI(not incl. JPY, China A)[2,207 stocks]

Morningstar Developed Markets(ex JP) Large-Mid[1,937 stocks]

S&P Global Large Mid
Index (ex JP)[3,003 stocks]

Number of index
constituents

2,106

1,909

2,303

Assets undermanagement¥1,178.4 billion¥343.8 billion¥2,823.9 billion(Source) Prepared by GPIF based on FactSet, etc.
(Note) Number of index constituents and assets under management are as of March 31, 2021.

72

Investment Results in Fiscal 2020

7 ESG Activities

and how they construct indexes, and to proactively

GPIF believes that in order to encouragecompanies to address ESG issues and disclose

engage with companies. As a result, dialogue between

information proactively, it is important to help themindex providers and companies is increasing rapidly,

deepen their understanding of the principles of ESG

which we hope to lead to an improvement inevaluation and index construction. To promote such

responses to ESG issues and information disclosure

understanding, GPIF requests for index providers to

by Japanese companies.

publicly disclose how they conduct ESG evaluation(%) Percentages of companies that made contact with MSCI during the ESG evaluation process

100

80

60

40

Japan
Europe20

0

North America
Others(APAC ex Japan)

2016

2017

2018

2019

2020

Reproduced by permission of MSCI ESG Research LLC ©2021. All rights reserved.
(Note) Universe is MSCI ACWI constituent companies. The above graph extracts major countries with 40 or more MSCI ACWI
constituent companies.

73

Investment Results in Fiscal 2020

7 ESG Activities[3] ESG integration in fixed income investment
Asian Development Bank (ADB). In addition to this, inprovides asset managers with an opportunity to invest

2019, GPIF also established partnerships within green, social and sustainability bonds issued bygovernment finance agencies. In fiscal 2020, while

multilateral development banks including the World

maintaining these existing partnerships, we have

Bank Group and government finance agencies ofentered into new partnerships with three government

individual countries, which provide external asset

finance agencies, the NWB Bank (Nederlandsemanagers with an opportunity for ESG integration in

Waterschapsbank) in the Netherlands, KBN

fixed income investment and obtaining excess returns(Kommunalbanken Norway KBN) in Norway, and Export

against government bonds. Behind this, (i) demand forDevelopment Canada (EDC) in Canada. As of March

green bonds often exceeds supply in the primary31, 2021, we have built investment platforms with ten

market, and it is difficult to purchase them in themultilateral development banks and six government

secondary market because many of the investors tend

finance agencies. The investment in green bonds,

to hold them until maturity; and (ii) GPIF has sought asocial bonds (including COVID-19 bonds issued to

way to secure investment returns because it holds

finance solutions to the challenges from COVID) andbonds worth, most of which are government bonds

sustainability bonds through these platforms reachedissued by developed countries including Japan and¥1.1 trillion as of the end of March 2021 (calculated by

Europe where government bonds with negative yield

GPIF based on Bloomberg data for bonds inhave become more common. This initiative started withcompliance with principles, etc. of International Capitalentering into a partnership with the International Bank

Market Association (ICMA)).

for Reconstruction and Development (IBRD) and the

Chapter 1

GPIF has established an investment platform which

GPIF promotes ESG integration not only in equity

International Finance Corporation (IFC) in April 2019,

investment but also fixed income and other asset

both members of the World Bank Group, and thenclasses in order to reduce the negative impacts ofexpanded to major multilateral development banks

environmental and social issues and improve long-term

including the European Investment Bank (EIB) and thereturns on its entire investment assets.

74

Investment Results in Fiscal 2020

8

8 Other Major Initiatives

O ther Major Initiatives[ 1 ] C a l l f o r a p p l i c a t i o n s f ro m e x t e r n a l a s s e t m a n a g e r s
Call for applications through the Asset Manager Registration System
A. St a t us o f th e in tro du cti on o f th e A sset Ma na ge r R e gis t r a t ion S y s t e mAsset class

The number of
entries

Domestic bonds

11

0

GPIF expanded the scope of the Asset Manager
Registration System to all four traditional asset
classes in February 2018. The status of registrationof external asset managers as of the end of fiscal
2020 is as listed in the right table.

The number of
information provided

Foreign bonds

272

55

Domestic equities

64

12

Foreign equities

514

150

B. Se l e c t i o n f o r fo ur t rad it io nal asse t clas s e sWith the aim of improving the long-term return fromhired five funds out of the candidates which had

the overall assets under management, we hired thepassed the second screening in fiscal 2019. In

following funds. For domestic equity passive

addition, we selected two passive funds for foreign

investment, we added two funds pegged with J-REIT

bonds.

index. As for domestic equity active investment, we
C. Sc re e ning p ro cess f or act ive manager s of dome s t ic bonds
In order to achieve a stable excess rate of return, GPIF started a search of active managers for domestic bonds andcompleted due diligence of the final candidates.
D. Ca l l f o r a p p l i cat io ns fo r manag ers of alt e r na t iv e a s s e t s
GPIF has been calling for applications for asset

fiscal 2017, GPIF selected one external asset

managers who will implement multi-manager

manager for a foreign real estate mandate in fiscal

investment strategies for alternative assets

2018, one external asset manager for a global(infrastructure, private equity, and real estate) sinceprivate equity mandate in fiscal 2019, one external

April 2017, with the aim of improving efficiency

asset manager for a global private equity mandate

through investment diversification. Following theand one external asset manager for a foreign real

selection of one external asset manager for aestate mandate in fiscal 2020, and we have started

domestic real asset mandate and three external

investing in those assets.

asset managers for an infrastructure mandate in

Flexibly adopt new
asset managers

GPI F
Data Entry

75

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 2020

8 Other Major Initiatives

The selection process and screening criteria for external asset managers
B. In accordance with Stewardship Principles withshall clarify the necessary profiles and investmenta provision of “ESG Integration into Investment

capabilities of products and managers prior toProcess” requesting ESG integration to external asset

starting a selection process, and go on to the second

managers, GPIF shall assess if they include ESG

screening process focused on the availability ofissues in investment analysis and investment decisions

these attributes, to narrow down candidates for more

explicitly and systematically on “Investment process”,

detailed screening in the third screening process.

which is one of assessment criteria.

Chapter 1

A. In order to conduct the selection more flexibly, GPIF

We used to finalize comprehensive assessment andadoption simultaneously, but has started to finalize
only an assessment in the third screening process,and then make a final decision by taking into accountthe composition of external asset managers, so that
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.

● Investment process(including ESG integration)● Organization and human resources● Internal control● Stewardship activities

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.

(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.
●

76

Investment Results in Fiscal 2020

8 Other Major Initiatives

Outline of a new performance-based fee structure
In April 2018, GPIF introduced a full-scale performance-of excess returns over the long term) and enhancing self-

based fee structure with the aim of strengthening thegovernance (more efficient management of investmentalignment of interest between GPIF and external active

capacity) of active managers. The outline of the new

managers (encouraging them to achieve an excess rate

performance-based fee structure is as follows.

of return over the benchmark and improving the quality

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
not deliver 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 multiyear 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%

77

-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)

Investment Results in Fiscal 2020

8 Other Major Initiatives

Management and assessment of external asset managers, etc.
A. M a na g ement an d assessment o f ext e r na l a s s e t ma na ge r s
In addition, GPIF decided to cancel one domestic

requested that monthly reports be submitted onequity active fund managed by a company which wasinvestment performance and risk status to ascertain

found to have committed significantly improper action.

the status of compliance with investment guidelines,

To better manage external asset managers who

and we receive further explanations in regularspecialize in transition management, GPIF requested

meetings and other activities.

reports on the transactions in transition deals,

In fiscal 2020 annual assessment process, GPIF

Chapter 1

To better manage external asset managers, GPIF has

ascertained the status of compliance with investment

focused on those funds with investment concerns

guidelines, and received explanations in regularand decided to cancel two domestic equity active

meetings and other activities.

funds, and delivered a warning to one domestic
equity active fund.
B. M a na g ement an d assessment o f cus t odia ns
To manage custodians, we requested data on“internal controls”, “asset management system”,

asset management, ascertaining the status of“global custody”, “reporting and information sharing”,

compliance with asset management guidelines, andand “information security measures”. The results ofreceived explanations in regular meetings, including

this comprehensive assessment showed that there

web meetings, and other activities. We assessed

were no particular problems identified with any

custodians based on the following criteria incustodian, which led us to conclude that it would beaccordance with our operational policy: “organization

appropriate to continue the existing contracts withand human resources”, “operational structure”,

them.

C. Re v ie w i n g ou r app roach t o cus t odians
GPIF previously adopted approach of selecting

appropriately carry out risk management associatedone custodian for each asset class to entrustwith investment diversification and increase theadministrative operations. However, it is widely

effectiveness of engagement with external asset

known that such approach involves the risk ofmanagers. Therefore, we have implemented ainterfering with the diversification of investment

system for gathering and using data for investment

management and concerns over the businessdecisions, separately from conventional data forcontinuity plan (BCP). Accordingly, GPIF is reviewing

accounting purposes.

our approach to asset management to enable theRegarding the adoption of multiple custodians for

adoption of multiple custodians for managing a single

managing a single asset class, GPIF has switched toasset class.

a multiple- custodian framework for asset classes for

It is necessary for GPIF to gather investment

which the development of the necessary systems has

data more quickly than before and use them

been completed. In fiscal 2020, we adopted multiple

for risk analysis and other matters, in order tocustodians for managing foreign equities.

(Note) For the list of external asset managers, etc., refer to page 94-95.

78

Investment Results in Fiscal 2020

8 Other Major Initiatives[ 2 ] P ro m o t i n g re s e a rc h a n d s t u d y
GPIF Finance Awards
Today, investment techniques are becoming increasingly

In 2020, the ceremony for the fourth GPIF Financesophisticated and financial products are growing theirAwards was held. The award winner was determined asdiversities. In light of this, GPIF believes it is essential

follows, after going through a screening process by theto foster an environment that encourages academic

selection committee comprised of renowned researchers

research in investment fields, so that the pension reservesin the field of finance including Dr. Robert Merton,are invested safely and efficiently.

Professor of MIT (Nobel laureate in economics in 1997).

Award winner : Dr. TODA Alexis Akira, Associate Professor at the University of California San
Diego
Profile: Dr. Toda graduated from the School of Medicine, the University of Tokyo,
earned his Master of Economics from the Graduate School of Economics, theUniversity of Tokyo and earned his Ph.D. from the Department of Economics,
Yale University. He served as an Assistant Professor of Economics at the
University of California San Diego prior to the current position from 2019.

Selection
Reason: Dr. Toda has made a distinguished contribution in mathematical economics
and finance. Especially he has written many papers on power law, which
naturally emerges in dynamic general equilibrium models with heterogenous
agents. His central research interests lie in general equilibrium theory and its
applications especially in finance and macroeconomics. We expect his further
achievements in the future.

Judges’comments(excerpt): Dr. Toda is specialized in the general equilibrium theory and its application
to finance and macroeconomics, with splendid achievements acrossa wide range of fields including mathematical economics, finance andmacroeconomics. In particular, we highly evaluated that, in the generalequilibrium theory with the presence of disparate individuals, he has
outstanding achievements in the application to both the theory of power-law
distribution as an natural result and finance theory, and presents a new phaseof the general equilibrium theory in the field of important themes in finance,
which is thought-provoking to not only researchers but also practitioners.
We, as selection committee members of GPIF Finance Awards, expect
Japanese researchers, like Dr. Toda, to conduct many researches that have ahigh academic rating and high potential of application to the finance practices,
and also hope that finance research in Japan will become even more active.

Selection committee members
Robert C. Merton

Nobel Laureate in Economic Sciences, The School of Management Distinguished Professor of
Finance at MIT Sloan and University Professor Emeritus at Harvard University

Josh Lerner

The Jacob H. Schiff Professor of Investment Banking at Harvard Business School

David Chambers

Reader in Finance, Cambridge Judge Business School, University of Cambridge

UEDA Kazuo

Professor, Faculty of International Studies, Kyoritsu Women's University and Director, Center for
Advanced Research in Finance (Former chair of Investment Advisory Committee)

OKINA Yuri

Chairperson of the Institute, The Japan Research Institute, Ltd. (Member of Financial System Council)

OKIMOTO Tatsuyoshi Associate Professor, Crawford School of Public Policy, Australian National University
FUKUDA Shinichi

Professor, Graduate school of Economics, The University of Tokyo (Member of Financial System Council)

YONEZAWA Yasuhiro Professor, Graduate School of Business and Finance, Waseda University (Former chair ofInvestment Advisory Committee)(Note) For the details of “GPIF Finance Awards”, refer to GPIF’s website at https://www.gpif.go.jp/en/investment/research/awards/ .

79

Investment Results in Fiscal 2020

8 Other Major Initiatives

Research and study
GPIF considers that it is necessary to conduct research

we carried out the following five research studies andstudies and joint research projects with universities,

joint research projects.

research activities in order to continue investments of(Note) For the details of “Research and study”, refer to GPIF’s website athttps://www.gpif.go.jp/en/investment/research/commission.html .

pension reserves safely and efficiently. In fiscal 2020,

Chapter 1

and accumulate knowledge acquired through such

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

of investment behaviors taken by an active asset

Intelligence within Government Pension Investment

manager in the past and recent times. In addition, theFund’s Investment Management Practices,” since fiscal

study to capture the degrees of similarities among asset

2017, the trading data of GPIF’s active managers for

managers was also conducted.

domestic equities and foreign equities was analyzed,

The result showed the potential to identify changes inusing machine learning, and showed the possibility ofmanagers’ investment behavior and differences between

classifying investment styles into patterns and identifying

asset managers, that have been not able to be achievablestyle drifting. From fiscal 2019 to fiscal 2020, the study

solely by conventional indicators such as the investment

was further developed to attempt to quantify informationstyle of asset managers.

which is difficult to assess quantitatively, such as

Commissioned to: Sony Computer Science Laboratories, Inc.

uniqueness or habits, in order to capture the consistency
B. Research and study on private debt
Purpose of research: GPIF intends to diversify

estate nonrecourse loans, infrastructure debt, etc.)

our investment targets for the interests of thecan become another target of investment.

pension beneficiaries. Its past initiatives include

As a result, it was confirmed that various

an investment in alternative assets having different

investment strategies can be adopted for private

risk-return profiles from traditional assets. The

debt assets and that the private debt market has

study was conducted for the purpose of diversifying

grown to one of the major asset classes in size.

investments by examining whether private debt

Commissioned to: SAPIAT(private placements, bank loans, direct lending, real
C. Research regarding a method to duplicate the performance of alternative assets
Purpose of research: Since alternative assets tend

to promptly get exposures to private equity assets,

to have lower liquidity and higher fees compared toamong other benefits, without any concern for liquidity

traditional assets, GPIF understands that it must ensure

constraint. On the other hand, we reaffirmed thesufficient liquidity to pay pension benefits and evaluate

benefit of holding real assets because the reproduced

investment fees and performance appropriately.

performance is unstable and it is still difficult to

For this purpose, GPIF collects information

reproduce the performance of a high-return fund.

regarding (i) basic matters of performance data

Moreover, the investment management fee level forand indexes of alternative assets; (ii) a method toprivate equity asset managers looks expensive but the

duplicate the performance of alternative assets using

analysis found that, given the return level, it is at an

traditional assets and listed assets; and (iii) a method

appropriate level in comparison with fees for traditional

to evaluate investment fees and performance, in orderassets. On the other hand, however, some fee structure

to organize matters to be resolved upon the adoption

issues were pointed out by institutional investors in theof the above-mentioned duplication method andinterviews conducted as a part of this survey.

assessment method.
The survey result supports the concept that theBased on this research result, we would like tocontinue to take initiatives to further improve themarket average performance of private equity is

accuracy of reproduction techniques etc., while

reproducible to a certain degree. This shows that

continuously expanding our investments in real assets.

this reproduction technique would enable investors

Commissioned to: Nomura Research Institute80

Investment Results in Fiscal 2020

8 Other Major Initiatives

D. Survey for corporate values in the post-COVID-19 world
Purpose of research: Following the trends in Europe andConsidering these circumstances, we have started

the United States, Japanese corporations are increasing

a survey for corporate values in the post-COVID-19

their business activities that focus on contributions

world, such as exploring for a development of a method

to social values (non-economic values), such as ESG

to measure the social value for various stakeholders inand SDGs activities. However, corporate earnings

the COVID-19 era, and forecasting the figure of future

are worsening in the short term due to the COVID-19

society which puts higher priority on social value,

pandemic, and this may cause a loss of momentum forthrough questionnaire to various stakeholders, data

these corporate activities.

analysis, and AI-driven future simulations.
Jointly research entity: Kyoto University

E. Joint research on diversification effects and portfolio efficiency obtained through ESG investment
Purpose of research: GPIF, as a universal owner and aSpecifically, it requires a chronological analysis

cross-generational investor, promotes the integration of

method or a country-specific comparative analysis

ESG into our investment s for reducing negative effects

method based on a quantitative analysis taking historicalon environmental and social issues and improving long-changes and a difference between countries into

term investment returns of the overall portfolio asset. In

account. This study especially utilizes a sophisticatedpursuing these initiatives, examination of diversification

method using a regime-switching model, etc. aiming toeffects and portfolio efficiency obtained through ESG

obtain an advanced and unique outcome through theinvestments allows for more appropriate and efficient

detection of regime variances and condition analysis.

ESG initiatives, while the effectiveness must be assessed

Jointly research entity: Crawford School of Public Policy,

from an objective point of view.

Australian National University(Note) ”Joint research of risk management indicators for a flexible investment” was canceled in December 2020 due to difficulties in developing useful management
indicators.

81

82

Roles and Organizational Operation ofChapter 2 Government Pension Investment Fund
1

GPIF’s Roles in the Public Pension Scheme[ 1 ] G P I F ’s p o s i t i o n
The pension finance system and GPIF
Japan’s public pension scheme is fundamentally managed

adopted in the revision of 2004. Through these measures,

as a pay-as-you-go system that incorporates the concept

the sustainability of the public pension system is designed toof intergenerational dependency, whereby pension

be improved (Note).

premiums collected from working generations support

There are three laws relevant to investment of pension

elderly generations, instead of the advance funding method

reserve: the Employees’ Pension Insurance Act; the National

whereby funds required to cover pension benefits are

Pension Act; and the Act on the Government Pension

accumulated in advance.

Investment Fund as an Incorporated Administrative Agency

Under the pay-as-you-go pension system, it is not(hereinafter the “Act on the Government Pension Investment

generally necessary to hold a large amount of reserve

Fund”) . These laws provide that “the pension reserve

fund, aside from a payment reserve. However, to respondshall be managed safely and efficiently from a long-term

to changes in the population and economy appropriately,

perspective solely for the pension beneficiaries” (Employees’

and to prepare for further decreasing birthrate and aging

Pension Insurance Act and National Pension Act) and “thepopulation expected in the future, GPIF still holds certain

pension reserve shall be managed safely and efficiently” (Actamount of reserve funds in the public pension scheme,on the Government Pension Investment Fund). Accordingly,

while being managed under a pay-as-you-go system. It

the most fundamental legal requirement for management

is stipulated that “the portion of pension premiums notof the pension reserve is “safe and efficient management ofallocated to benefits will be invested as reserve fund topension reserve from a long-term perspective.”stabilize pension finance.”
Japan’s decreasing birthrate and aging population are

As is the case in other incorporated administrative
agencies (Act on General Rules for Incorporated

progressing faster than in any other country. Under the

Administrative Agencies), the relevant minister lays out

pension system revision implemented in 2004 (hereinafter

the objectives of GPIF for a set period of time. “Objectives

the “revision of 2004”), the pension premium level will

to be achieved by GPIF” (hereinafter the “Medium-term

remain fixed into the future and the finite period of financial

Objectives”), established by the Minister of Health, Labour andequilibrium is set to be approximately 100 years, covering

Welfare, stipulates that “GPIF is required to achieve a long-the period until the current population would finish receiving

term real return (net investment yield on the pension reserve

the pension premium. This measure was implemented infund less the nominal wage growth rate) of 1.7% with minimalorder to balance the pension finance over 100 years (therisks based on the current status and outlook for pension

finite financial equilibrium method). However, the fixing offinance.” In light of these requirements, GPIF, in its Medium-a funding source for future pension benefits also makes

term Plan, established the asset allocation (policy asset mix)

the amount of fund fixed. Therefore, a mechanism tofrom a long-term perspective, on the premise of portfolio

automatically adjust the pension benefit and premium

diversification, and carries out investment and management ofcontribution (Macro-Economic Slide Formula) was also

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).

83Roles of reserve fund in pension finance
The reserve fund is to be used to stabilize pension

is funded by pension premiums and government

finance. In the current system that aims at balancing

contributions for the year, while the financial source

pension finance in about 100 years, as mentioned above,

obtained from the pension reserve (repayment of trust

a fiscal plan is drawn up to use the pension reserve.

money or payment to national treasury) accounts for

Under this plan, investment returns on the reserve fundabout 10 percent. The reserve fund may not be reduced

should be paid as a part of pension benefits initially.

for about the next 50 years or so. Moreover, GPIF owns

In addition to investment returns, the accumulated

a sufficient reserve fund necessary for the payment

fund will be gradually withdrawn, after a set period ofof pension benefits, and therefore short-term market

time. Ultimately, after 100 years or so, it is expected tofluctuations associated with the investment of pension

maintain a reserve fund equivalent to one year of pension

reserve do not affect payments for beneficiaries. In otherbenefits. About 90 percent of the financial source ofwords, an unrealized gain or loss in a specific year may

pension benefits (the average of approximately 100

not be reflected in the amount of pension benefits in theyears based on the assumption of financial verification)

following year.

support the lives of the elderly generations.

Current
recipient
generation

Financial verification results(projections for pension reserves over approximately 100 years)

Chapter 2

Japan adopts a system where working generations[Trends of pension reserves under each scenario][Scenario I]
Peak: FY2095 (¥1,008 trillion)

Pensionbenefits

Pensionpremiums

Current
working
generation

Contributions[Scenario II]
Peak: FY2088 (¥693 trillion)

Pensionbenefits[Scenario III] Peak: FY2079
Pensionpremiums

Futureworking
generation¥479 trillion

Contributions[Scenario III]

Actual as of March 31, 2020

¥151 trillion[Scenario IV]
Peak: FY2074 (¥300 trillion)[Scenario V]
Peak: FY2046 (¥234 trillion)

2020 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 31.

84

Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme[ 2 ] Regulatory requirements for pension reserve management and outline of Medium-term Objectives and Medium-term Plans
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-investing the reserve funds is to contribute to the futureterm Objectives of GPIF also stipulate that GPIF is notstability of the public pension scheme through stable andallowed to select 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 source of funding
for future pension benefits and... the purpose of the fund is to contribute to the future stability of management of the
Employees’ Pension Insurance through stable and efficient management from a long-term perspective solely for thepension beneficiaries of the Employees’ Pension Insurance.”
Article 20, Paragraph 2 of the Act on the Government Pension Investment Fund“... GPIF must consider generally recognized expertise and domestic and overseas macroeconomic trends, as well as
the impact of the pension reserve on the markets and other private sector activities, while avoiding concentration on
any particular style of investment. GPIF’s investment management should also satisfy the objectives under Article 79–2
of the Employees’ Pension Insurance Act and Article 75 of the National Pension Act.”

In light of these requirements, GPIF establishes thefor Local Government Officials, and the Promotion andpolicy asset mix in the fourth Medium-term Plan for the

Mutual Aid Corporation for Private Schools of Japan.

five years from fiscal 2020 to fiscal 2024 from a long-

In addition to the formulation and publication of theterm perspective, based on the philosophy of diversified

Policy for Investment Management (Operation Policy), theinvestment. It is regarded that GPIF should take into

Medium-term Plan requires GPIF to review the Operationconsideration the reference portfolio jointly established by

Policy in a timely and proper manner in light of changes

GPIF, the Federation of National Public Service Personnel

in the economic environment and revise it promptly as

Mutual Aid Associations, the Pension Fund Association

required.

Investment objectives, risk management, ensuring transparency and others
In the fourth Medium-term Objectives for the period from

portfolio, and manage and control risks of the overall

fiscal 2020 to fiscal 2024 stipulate that a pension reserve

portfolio, each asset class, each asset manager, andmust achieve a long-term real return (net investment

each custodian.

yield on the pension reserve fund less the nominal wage

GPIF shall combine passive and active investments,

financial verification. The fourth Medium-term Objectives

implement active investment based on the strong

also require GPIF to make efforts to pay close attention

conviction of the excess return, taking historical

not to affect market pricing or investment activities byperformance into account, and GPIF shall follow theprivate sectors, and to achieve the benchmark rate ofconcept that the sustainability of investee companies

return (market average rate of return) for the total portfolio

and the overall markets will be critical for the expansion

and each asset class during the period for the Medium-of long-term investment returns in the management ofterm Objectives.

pension reserves. Based on this, GPIF shall manage theRegarding risk management for the pension reserve,
it stipulates that GPIF shall maintain the diversified

85

The fourth Medium-term Objectives stipulates thatgrowth rate) of 1.7% with minimal risks based on thepension reserve while paying attention to the Operation
Policy mentioning that pension reserves shall be managed

Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme

and invested for the purpose of securing long-term returns

targets, among others, shall be resolved upon thefor the pension beneficiaries, and implement necessary

deliberation of the Board of Governors.

initiatives by individually examining the promotion of

An outline of the deliberations at the Board ofinvestments that consider ESG (environmental, social andGovernors is promptly published upon obtaining approval

governance) as non-financial factors.

of the Board, by means of which we hope to help ensure

In addition, important matters regarding thethe transparency of GPIF’s organizational operation.

introduction of new investment methods and investment

Other important matters for pension reserve management
The fourth Medium-term Objectives call for thoroughindividual stocks by itself, in due consideration of thecompliance with the duty of care and fiduciary duty of

impact on corporate management and others.

prudent experts.
When managing the pension reserve, GPIF is required

It also sets forth that GPIF should secure theliquidity necessary for pension payouts by taking into
consideration the outlook for the pension finance and theprevent exposure to unfavorable market impact, andstatus of revenues and expenditures. At the same time,

avoid the extreme concentration of investing and/or

GPIF is expected to enhance the functions necessary

withdrawing at one time.

for assuring liquidity without shortages, including selling

GPIF is also required to take appropriate measures
regarding the exercise of voting rights, and not to selectChapter 2

to consider the market size, pay close attention toassets in a smooth manner while giving consideration tomarket price formation and other factors.

Enhancement of investment capabilities, improvement of operational efficiency
In the fourth Medium-term Objectives, GPIF is expectedduring the Medium-term Objectives period should be at

to clarify the area of operations requiring highly skilled

least 1.24% per annum based on the fiscal 2019 level.

professionals, while developing an environment for

The cost-saving target includes general administrative

attracting such talent, providing training by highly skilledexpenses (excluding expenses related to computer

professionals to improve the operational capabilities ofsystems and personnel expenses) and operational

our staff, and formulating a policy to secure and foster

expenses (excluding expenses related to computer

human resources strategically. It also stipulates that GPIF

systems, fees for external asset managers, index fees,

shall explain clearly to the public the appropriateness of

personnel expenses, and expenses related to short-term

the remuneration level applied to such highly skilled

borrowing). Costs added or expanded pursuant to theprofessionals by referring to comparable ones in the

December 2013 Cabinet Office decision and similar

private sector.

factors are excluded from the cost-saving target. Except

Moreover, GPIF is expected to conduct more

for this additions or expansions, however, over 1.24%

sophisticated risk management by performing a forward-

efficiency (annually by average) from the previous year islooking risk analysis and a long-term analysis, and therequired, and the additions and expansions are ultimately

Board of Governors shall monitor the management

included in the 1.24% cost-saving target from thestatus of individual portfolio risks properly.

following fiscal year onward.

With regard to improvements in operational efficiency,
the Objectives stipulate that the average cost savings86Roles and Organizational Operation of Government Pension Investment Fund2

2 Organization and Internal Control System

Organization and Internal Control System[1] Governance framework
GPIF has adopted a governance framework in which theand other fields relevant to GPIF’s operations. Important

Board of Governors, established in October 2017,

decision-making carried out by the Board of Governors

operates on a majority vote decision-making system andincludes development of the policy asset mix and thehas supervisory powers to determine whether decisions

Medium-term Plan, preparation of annual plans andare properly executed. Three Governors concurrently

annual reports, and decisions on important mattersserve as Auditors and form the Audit Committee, ofrelated to the organization such as staff size. It also

which one is a full-time member. The Audit Committee

includes the operation of GPIF, such as the formulation

carries out audits of GPIF’s operations. In addition, theof basic policies for portfolio risk management andAudit Committee is entrusted by the Board of Governors

internal control, the establishment of organizational ruleswith the authority to supervise the status of GPIF’s

and other matters, approval of the appointment of theoperations executed by the President or Executive

executive director.

Managing Directors. The President presides over GPIF’s

It has been three years and a half since ouroperations in accordance with the provisions of Article 7,

governance system shifted from individual decision-

Paragraph 1 of the Act on the Government Pension

making by the President to a majority voting at theInvestment Fund. This governance system, including theBoard. The root of the word “governance” is a Greekmajority vote decision-making system, ensures theword meaning “steering.” It is essential in the practice ofseparation of decision-making and supervision from thegovernance to go beyond pro-forma development toexecution or implementation of said decisions.

promote substantive reforms of governance, and to carry

The Board of Governors consists of 10 members: theout appropriate “steering” of the organization in an effort

President and nine professionals with an academic

to make GPIF an organization worthy of greater trust

background or practical experience in economics,

from Japanese public.

finance, asset management, business administration,
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)87

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 ] B o a rd o f G o v e r n o r s
At meetings of the Board of Governors, experts in various

ESG indexes, and establish the Legal Department

fields, such as economics, finance, asset management

following a discussion for improving and strengthening

and business administration, discuss a broad range oflegal functions. The Board also received reports from theagenda items related to GPIF’s investment and operation

President or other members on the asset allocation ratio

management from a multidimensional perspective andand the status of portfolio risk management for active

make timely and appropriate decision-making. The Board

discussion. The details of discussion by the Board ofof Governors held a total of 14 meetings in fiscal 2020. An

Governors are published later on the website of GPIF as aoutline of the meetings is as described in the following table.

summary of agenda items.

In fiscal 2020, the Board of Governors passed a
resolution to formulate practical guidelines for selecting

Outline of meetings of the Board of Governors(Fiscal 2020)

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

40th meeting

April 1, 2020

(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) Importantmatters related to organization and staff size; (iii) Revision of the regulations of preparation and disclosure of the minutes of the Board of Governors

41st meeting

April 27, 2020 (Resolution) Assessment of pension reserve fund management (2)42nd meeting

May 28, 2020 ―43rd meeting(Deliberation) (i) Review of operations in fiscal 2019 (draft), (ii) Review of the achievement of the third
Medium-term Objectives (draft), (iii) Annual Report fiscal year 2019 (draft), (iv) Preparation of the finanJune 11, 2020
cial statements, business report, and financial report for fiscal 2019, appropriation of profit and loss andother important matters related to accounting (draft)

44th meeting(Resolution) (i) Review of operations in fiscal 2019 (draft), (ii) Review of the achievement of the third
Medium-term Objectives (draft), (iii) Annual Report fiscal year 2019 (draft), (iv) Disclosure of portfolio
June 29, 2020 holdings by asset category as of the end of March 2020, (v) Preparation of the financial statements,
business report, and financial report for fiscal 2019, appropriation of profit and loss and other importantmatters related to accounting (draft), (vi) Revision of the Policy to Fulfill Stewardship Responsibilities

45th meeting

July 22, 2020

46th meeting

September 18,(Resolution) Selection of ESG indexes (2)2020

47th meeting

October 9,
2020

Chapter 2

Date of meeting(Resolution) Selection of ESG indexes—

48th meeting

November 19,(Deliberation) Revision of the FILP bonds accounting classification
2020

49th meeting(Resolution) Revision of the procedural rules for the government’s procurement of goods
December 17,
and provision of specific services concerning the government’s procurement or other2020
international agreements

50th meeting

January 14,
2021(Resolution) (i)Revision of the FILP bonds accounting classification (2); (ii) Improvement
and strengthening of legal system and functions (2)51st meeting

February 5,
2021—

52nd meeting

March 12,
2021

(Deliberation) Annual Plan for fiscal 2021 (draft)

53rd meeting

March 26,
2021

(Resolution) (i)Annual Plan for fiscal 2021 (draft), (ii) Matters for resolution at the Boardof Governors, (iii)Revision of the organizational rules concerning the implementation of
LPs investment
88Roles and Organizational Operation of Government Pension Investment Fund2 Organization and Internal Control System[3] Audit Committee
The Audit Committee executes its duties through staff

Management Committee, the Management and Planning

members on the Secretariat for the Audit Committee,

Committee, the Procurement Committee, etc. as needed.

who assist the duties of the Audit Committee and are

The Audit Committee also assesses and analyzes theindependent from the President and Executive Managing

status and appropriateness of GPIF’s operations throughDirectors. The Audit Committee also coordinates closelyinterviews with the person in charge of each department,with the Internal Audit Department and the Accountthe President, and Executive Managing Directors as well

Auditor (Deloitte Touche Tohmatsu LLC).

as investigations at times. Then the Audit Committee

The Audit Committee held 15 meetings in fiscal 2020.

reports and shares information obtained through these

The Committee performed audits primarily from fiveactivities with the Board of Governors as appropriate,perspectives: the status of achievement of the Medium-and gives opinions to the Board and the President onterm Objectives; the status of execution of duties byorganizational management issues such as ways to

the Board of Governors and Governors; the status offurther strengthen internal controls. In addition, in fiscal

execution of duties by the President and other executives

2020, we also selected a candidate for Accounting

and staff members; the status of the internal control

Auditor for the fiscal years from 2020 to 2024, thoughsystem; and the status of accounting.

general competitive bidding (comprehensive evaluation

The Audit Committee, as part of the monitoring
operation entrusted by the Board of Governors, attends
committee meetings organized by the Executive Office,bidding method) process.
The results of these audits are published as the Audit
Report on GPIF’s website.

including the Investment Committee, the Portfolio Risk

[4] Execution system
Organization
As of April 1, 2021, GPIF has 12 executives, consisting

Department, the Portfolio Risk Managementof the Chairperson of the Board of Governors, eight

Department, the Information Security Administration

Governors (including three Governors concurrently

Department (Information Security Administration

serving as Auditors), the President, and two Executive

Division, IT Administration Division), the Investment

Managing Directors (one for Planning and General Affairs

Strategy Department (Investment Strategy Division),and the other for Management and Investment Operations

the Investment Administration Department (Investment

who is serving as the CIO), as well as 147 staff members

Support Division, Asset Management Division, Treasury(excepting part-time staff).

Division), the Public Market Investment Department

The organization consists of the Secretariat(Public Market Investment Division, Stewardship & ESG

for Board of Governors, the Secretariat for Audit

Division), the Private Market Investment Department, theCommittee, the General Affairs Department (General

Internal Fixed Income Investment Department, and the

Affairs Division, Accounting Division), the Planning

Legal Department and the Internal Audit Department (toand Communication Department (Planning andreport directly to the President).

Communication Division), the Research and Actuary

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

Organization chart (as of April 1, 2021)
Secretariat for
Board of Governors

Board of Governors
Chairperson

Audit Committee

Secretariat for
Audit Committee

Governors

General Affairs
General Affairs
Department

President
Executive Managing Director(Planning and General Affairs)

Planning andCommunication
Department

Chief ofstaff

Accounting
Planning andCommunication

Research andActuary Department

Executive Managing Director(CIO)

Portfolio Risk
Management Department

Compliance Officer

Investment Strategy
Department

Information Security
Administration
IT Administration

Chapter 2

Information Security
Administration
Department

Investment Strategy
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
Legal Department
Internal Audit
Department

90

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

Establishment of the Legal Department
GPIF established the Legal Department on March 1,

internal controls, and to further ensure thorough2021 to timely and appropriately meet unique legal needs

compliance with laws and regulations.

with respect to each alternative investment, to strengthenInternal control system
GPIF has put an internal control system in place inmanagement were established, including the rules foraccordance with the Basic Policies of Internal Control

operational and other risk management established byestablished by the Board of Governors.

the Board of Governors held in July 2019. Based on theSpecifically, regarding the system to ensure that theforth by the above new rules and regulations, GPIF goes

Managing Directors, and staff members comply withthrough a potential risk identification, analysis, andlaws and regulations, the Internal Control Committee isassessment process on an annual basis. In addition,

established to promote internal control. In addition, thethese rules and regulations stipulate that each

Compliance Committee is established under the Internal

department or office is required to promptly takeControl Committee to ensure compliance with laws andappropriate measures to deal with any risks that occur,

regulations as well as fiduciary responsibility, etc., andand to report on an identified risk to the department

the Compliance Officer is appointed. All executives andresponsible for supervising operational and other risk

staff members are informed of the necessity to comply

management and Internal Audit Department for each timewith the Investment Principles and the Code of Conductof risk occurrence. The operational and other risk

and act as an organization worthy of the trust of the

management execution status of GPIF is reported to the

public. A whistle-blowing system is also in place, andBoard of Governors once a year. In addition, thecorrective actions and preventive measures shall beoccurrence of a significant operational and other risk is totaken according to our internal rules whenever an illegal

be promptly reported to the Board of Governors.

or inappropriate activity is (or is expected to be)Specifically, regarding the system to ensure theperpetrated by executives or staff members of GPIF. In

efficiency of the execution of duties, the Investment

addition, the Internal Audit Department is established toCommittee has been established to carry out priorconduct internal auditing of GPIF’s operations anddeliberation to make decisions on important mattersrelated responsibilities.

related to the execution of management operations, andRegarding the management of the risk of losses ofother related systems, the Portfolio Risk Management
Committee has been established to appropriately monitor

holds careful discussions from a multidimensional
perspective under the supervision of the CIO.
In addition to the above, the Information Security

and handle various risks (portfolio risks) caused during

Committee promotes GPIF’s information security

the pension management. The Internal Control

measures, the Management and Planning Committee

Committee has been established to identify, analyze, andcarries out prior deliberation to make decisions on

assess operational risks (include reputation risks) thatimportant matters related to execution of GPIF’s

could impede GPIF’s day-to-day operations as well as tooperations, and the Procurement Committee ensures thetake measures against those risks. The Internal Control

proper state of procurement and subcontracting

Committee also conducts risk management by drawing

processes (excluding contracts with external asset

up and promoting measures necessary to be constantly

managers), and the Contract Monitoring Committee

aware of risk factors, prevent risks, and minimize losses

including external experts conducts procurement-related

in the event of risk occurrence.

inspections. By these committees, GPIF is committed toWith regard to operational and other risk, the newrules and regulations relating to operational and other risk91

new operational and other risk management process set

execution of duties by the President, Executive

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(Design of Public Pension Schemes/Pension verification)

Performance
evaluation

The Committee of Pension
Fund Management
Consultation

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
Audit

Board of Governors

Medium-term plan
Annual plan

Supervisionof execution

Consent

Audit Committee

Secretariat for
Audit Committee

Secretariat for
Board of Governors

Board of Audit
Audit

Participation

Audit and
Monitoring

Reports

President
Appointment(Note1)

Executive Managing Director(Management and Investment Operations)/CIO (Note2)

External audit

Chapter 2

Account Auditor
Executive Managing Director(Planning and General Affairs)

Internal Audit Dept.

Legal 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 andregulatory compliancein the execution of duties

System for retention andmanagement 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

Compliance Officer

Risk of losses management system

System to secure the efficiency
in the execution of duties

CIO (Chief Investment Officer)

Whistle-blowing liaison[Legal Counsel]

Whistle-blowing system

Internal Control Committee

Information Systems Committee

Portfolio Risk Management
Committee

Chief Information Officer

Sanctions Committee
Reliability ensuring system including financial reporting
Disciplinary Committee

Tripartite Audit Committee(Audit Committee, Account Auditor, Internal Audit Department)(Note1) The Executive Managing Director (Planning and General Affairs) is responsible for matters related to the General Affairs Department, thePlanning and Communication Department, the Research and Actuary Department, the Portfolio Risk Management Department, and theInformation Security Administration Department.
(Note2) 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 the Internal Fixed Income Investment Department.

92

Chapter 3

1

Reference Data

Investment Assets by Investment Method and by Manager, Etc.

[1] Investment assets by investment method and by asset class (market value at the end of fiscal 2020)
Market value (¥billion)

Portfolio allocation (%)

Total (Investment assets)

186,162.4

100.00

Passive investments

153,944.5

82.69

Active investments

30,617.6

16.45

Others1,600.3

0.86

Market value (¥billion)

186,162.4

100.00Total

43,822.9

23.54

Passive investments

31,959.6

17.17

Active investments

10,402.4

5.59

Others1,460.8

0.78

Total

47,294.3

25.40

Passive investments

36,001.0

19.34

Active investments

11,153.7

5.99

Others

139.5

0.07

Total

47,227.3

25.37

Passive investments

43,907.9

23.59

Active investments

3,319.4

1.78

Total

47,818.0

25.69

Passive investments

42,075.9

22.60

Active investments

5,742.1

3.08

Total (Investment assets)

Domesticbonds

Foreignbonds

Domestic
equities

Foreignequities

Portfolio allocation (%)(Note 1) The figures above are rounded, so the sum of each item does not necessarily match the total number.
(Note 2) Domestic bonds (others) refers to yen-denominated short-term assets. Foreign bonds (others) refer
to foreign currency-denominated short-term assets.

［ 2 ］C h a n g e s i n t h e r a t i o s o f p a s s i v e a n d a c t i v e i n v e s t m e n t(Unit:%)FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

Domestic
bonds

Passive

81.61

90.48

90.13

86.10

82.50

79.38

77.03

75.54

71.45

72.93

Active

18.39

9.52

9.87

13.90

17.50

20.62

22.97

24.46

28.55

27.07

Foreignbonds

Passive

70.87

70.60

71.70

69.85

64.94

60.89

61.98

66.24

73.81

76.12

Active

29.13

29.40

28.30

30.15

35.06

39.11

38.02

33.76

26.19

23.88

Domestic
equities

Passive

76.23

78.78

87.69

86.71

81.52

90.62

90.44

90.58

90.93

92.97

Active

23.77

21.22

12.31

13.29

18.48

9.38

9.56

9.42

9.07

7.03

Foreignequities

Passive

86.01

86.74

89.37

88.05

84.15

86.45

86.32

90.50

90.17

87.99

Total

Active

13.99

13.26

10.63

11.95

15.85

13.55

13.68

9.50

9.83

12.01

Passive

76.65

84.50

86.00

83.91

79.28

77.31

76.28

77.87

79.21

82.69

Active

23.35

15.50

14.00

16.09

20.72

22.69

23.72

22.13

20.79

17.31

(Note 1) The amount until the end of fiscal 2019 does not include short-term assets and FILP bonds. There are no FILP bonds outstanding as of the end of fiscal 2020.
(Note 2) The amount of domestic bonds (active) and total (active) as of the end of fiscal 2020 includes yen-denominated short-term assets. The amount of foreign bonds(active) and total (active) as of the end of fiscal 2020 includes foreign currency-denominated short-term assets.

93(Note 3) JPY hedged foreign bonds are classified as foreign bonds (passive) until the end of fiscal 2019 and as domestic bonds (passive) as of the end of fiscal 2020.

［ 3 ］Investment assets by manager, etc. (market value at the end of fiscal 2020)(Unit：￥billion)
Investment
methodAsset manager name(Subcontractor, etc.)
Asset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)AllianceBernstein Japan Ltd.Ⅰ

BPI

1,148.2

Asset manager name(Subcontractor, etc.)

Custodians

ManagerbenchmarkMarketvalue

Goldman Sachs Asset Management
Co., Ltd.Ⅰ

SSTB

G-AGG-EXC

316.2

Schroder Investment Management(Japan) LimitedⅠ

SSTB

G-AGG-EXC

602.6

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

SSTB

G-AGG-EXC

811.8

T. Rowe Price Japan, Inc.

MTBJEUROHY2％

60.2

MTBJ

USHY2％57.4

SSTB

EUROAGG

928.8

SSTB

G-AGG-EXC

1,070.1

SSTB

G-AGG-EXC

1,269.1

SSTB

USAGG

1,133.4(Goldman Sachs Asset Management, L.P., etc.)

616.9

CBJ

BPI

1,285.3

BlackRock Japan Co., Ltd.ⅠMTBJUSGOV-H

1,050.8

BlackRock Japan Co., Ltd. Ⅱ

MTBJ

EGBI-H

25.2

BlackRock Japan Co., Ltd. Ⅲ(BlackRock Financial Management, Inc.)MTBJUSMBS-H

634.6

CBJ

BPI

1,285.8

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅱ

CBJ

BPI-G

3,432.8

Mitsubishi UFJ Trust and Banking
CorporationⅠ

CBJ

BPI-G

3,387.1

PGIM Japan Co., Ltd Ⅱ

Resona Asset Management Co., Ltd.ⅠSSTBUSGOV-H

1,053.6

PIMCO Japan Ltd Ⅱ

Resona Asset Management Co., Ltd. Ⅱ

SSTB

EGBI-H

24.1

In-house investmentⅠ

CBJ

BPI

9,938.6In-house investment Ⅱ

CBJ

BPI-G

8,076.5

Asset Management One Co., Ltd. Ⅱ(Fidelity Institutional Asset Management(FIAM))CBJ

BPI-TIPS

1,103.1

BlackRock Japan Co., Ltd. Ⅺ

SSTB

G-AGG-EXC

731.7

Asset Management One Co., Ltd. Ⅲ

CBJ

BPI-TIPS

950.1

Barings Japan Limited

MTBJ

USHY2％

58.3

MU Investments Co., Ltd.

CBJ

BPI-TIPS

706.2

Tokio Marine Asset Management Co.,
Ltd.

CBJ

BPI-TIPS

943.3

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

SSTB

G-AGG-EXC

1,209.9

PGIM Japan Co., Ltd.Ⅰ

CBJ

BPI-TIPS

638.7

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

MTBJ

USHY2％56.0

CBJ

BPI-TIPS

548.3

UBS Asset Management (Japan) LtdⅠSSTBEUROHY2％

92.8

Manulife Investment Management(Japan) LimitedⅠ

CBJ

BPI-TIPS

433.3

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅲ

CBJ

BPI-TIPS

953.0

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

SSTB

G-AGG-EXC

687.4

Mitsubishi UFJ Trust and Banking
Corporation Ⅱ

CBJ

BPI-TIPS

948.6

In-house investment Ⅲ

CBJ—

2,962.3

In-house investment Ⅳ

CBJ—

1,460.8

Asset Management One Co., Ltd. Ⅳ

SSTB

WGBI

2,919.8

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

SSTB

WGBI

1,988.9

Nomura Asset Management Co., Ltd.Ⅰ

MTBJ

WGBI

2,841.1

BlackRock Japan Co., Ltd. Ⅳ

MTBJ

WGBI

4,816.8

BlackRock Japan Co., Ltd. Ⅴ

MTBJ

WGBI-O

1,286.9

BlackRock Japan Co., Ltd. Ⅵ

MTBJ

USGOV

2,177.0

BlackRock Japan Co., Ltd. Ⅶ

MTBJ

USGOV
1-3Y

0.1

BlackRock Japan Co., Ltd. Ⅷ

MTBJ

EGBI

3,573.2

BlackRock Japan Co., Ltd. Ⅸ

MTBJ

USHY2％(former Mizuho Trust & Banking)

PIMCO Japan LtdⅠ

(Pacific Investment Management Company
LLC (PIMCO), etc.)(BlackRock Financial Management, Inc., etc.)

BlackRock Japan Co., Ltd. Ⅹ(BlackRock Financial Management, Inc., etc.)(Schroder Investment Management Limited, etc.)(T. Rowe Price International Ltd.)

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

BNY Mellon Investment Management
Japan LimitedⅠ(Insight Investment Management(Global) Limited)(PGIM, Inc. etc.)

Foreignbonds active
investment(Pacific Investment Management Company
LLC (PIMCO), etc.)

FIL Investments (Japan) LimitedⅠ(BlackRock Financial Management, Inc., etc.)(Barings LLC, etc.)(Morgan Stanley Investment Management Inc., etc.)(Morgan Stanley Investment Management Inc.)(UBS Asset Management (UK) Ltd)

Foreign bondsothersIn-house investment Ⅴ

SSTB

—

139.5

Asset Management One Co., Ltd. Ⅵ

CBJ

TOPIX

8,323.6

Asset Management One Co., Ltd. Ⅶ

CBJ

RN-P

2,037.1

Asset Management One Co., Ltd. Ⅷ

CBJ

FTSE-BL

938.4

FIL Investments (Japan) Limited Ⅱ

MTBJ

TOPIX

126.4

BlackRock Japan Co., Ltd. Ⅻ

CBJ

TOPIX

5,273.2

BlackRock Japan Co., Ltd. ⅫⅠ

CBJ

FTSE-BL

552.2

Nomura Asset Management Co., Ltd. Ⅳ

CBJ

MSCI-IR

66.7

Nomura Asset Management Co., Ltd. Ⅴ

CBJ

RAFI

1,354.5

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅴ

CBJ

TOPIX

7,384.8

302.9

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅵ

CBJ

SP-C

1,536.5

EUROHY2％

91.9

Mitsubishi UFJ Trust and Banking
Corporation Ⅲ

CBJ

TOPIX

6,626.4

CBJ

MSCI-ESG

2,026.8(former DIAM)(former Mizuho Trust & Banking)(former DIAM)

MTBJ(Geode Capital Management, LLC)

Domestic
equities
passiveinvestment

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅳ

SSTB

WGBI

4,579.9

Mitsubishi UFJ Trust and Banking
Corporation Ⅳ

Resona Asset Management Co., Ltd. Ⅲ

SSTB

WGBI

5,027.2

Mitsubishi UFJ Trust and Banking
Corporation Ⅴ

CBJ

MSCI-WIN

1,236.2

Resona Asset Management Co., Ltd. Ⅳ

SSTB

WGBI-O

738.3

Resona Asset Management Co., Ltd. Ⅷ

MTBJ

TOPIX

6,425.0

Resona Asset Management Co., Ltd. Ⅴ

SSTB

USGOV

2,606.9

Asset Management One Co., Ltd. Ⅸ

CBJ

TOPIX

95.4

Resona Asset Management Co., Ltd. Ⅶ

SSTB

EGBI

3,050.1

Asset Management One Co., Ltd. Ⅹ

CBJ

RN-SG

127.9

SSTB

G-AGGEXC

892.5

Invesco Asset Management (Japan)
LimitedⅠ

CBJ

TOPIX

288.4

GBIEMGDEXC

233.9

Invesco Asset Management (Japan)
Limited Ⅱ

CBJ

TOPIX

89.7

EMBIGD

104.1

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

CBJ

TOPIX

673.2

Schroder Investment Management(Japan) Limited Ⅱ

CBJ

TOPIX

357.5

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

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

AllianceBernstein Japan Ltd. Ⅱ(AllianceBernstein L.P., etc.)(former Mizuho Asset Management)

SSTB
SSTB

Domestic
equities active
investment

Chapter 3(former Mizuho Trust & Banking)Foreignbonds active
investment

CBJ(Unit：￥billion)
Investment
methodUSMBS-H(former DIAM)

Foreign bonds
passiveinvestment

Marketvalue

MTBJ

Domestic
bonds passive Sumitomo Mitsui Trust Assetinvestment
Management Co., Ltd.Ⅰ

Domestic
bonds others

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

(AllianceBernstein L.P., etc.)

Domestic
bonds active
investment

Custodians94Reference Data

1 Investment Assets by Investment Method and by Manager, Etc
Etc.

(Unit：￥billion)(Unit：￥billion)
Investment
methodDomestic
equities active
investment

Custodians

ManagerbenchmarkNikko Asset Management Co., Ltd.Ⅰ

CBJ

TOPIX

0.5

Nikko Asset Management Co., Ltd. Ⅱ

CBJ

TOPIX

62.5

Nomura Asset Management Co., Ltd. Ⅵ

CBJ

TOPIX

66.5

Nomura Asset Management Co., Ltd. Ⅶ

CBJ

RN-S

71.8

Nomura Asset Management Co., Ltd. Ⅷ

CBJ

MSCI-JS

297.1

FIL Investments (Japan) Limited Ⅲ

CBJ

TOPIX

521.2

(Dimensional Fund Advisors LP)

Marketvalue

Sumitomo Mitsui DS AssetManagement Company, LimitedⅠ

CBJ

RN-V

327.6

Lazard Japan Asset Management K.K.Ⅰ

MTBJ

TOPIX

66.3

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

CBJ

TOPIX

242.9

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

MSCI-A-EXC

18,230.9

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

MTBJ

MSCI-N

1,498.0

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

MTBJ

MSCI-EU

362.6

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

MTBJ

MSCI-P

84.9

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

MTBJ

MSCI-EXC

551.0

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

MTBJ

SP-GC

2,823.9

BlackRock Japan Co., Ltd. ⅪⅤ

MTBJ

MSCI-A-EXC

3,220.6

Sumitomo Mitsui Trust AssetManagement Co., Ltd. Ⅶ

MTBJ

MSCI-A-EXC

8,858.2

Legal & General Investment
Management Japan KKⅠMTBJMSCI-A-EXC

4,922.9

Legal & General Investment
Management Japan KK ⅡMTBJMSCI-EXC

0.4

Legal & General Investment
Management Japan KK Ⅲ

MTBJMSCI-A-ESG

1,178.4

Investment
methodCustody

Transition
management(Legal & General Investment Management Limited)

71,465.5
186,161.7

SSTB

16.7

BlackRock Japan Co., Ltd. XV(Foreign bonds)(BlackRock Asset Management North Asia Limited)Manager benchmark

Source of benchmark

BPI

NOMURA-BPI (excluding ABS)

Nomura Research Institute, Ltd.

BPI-GNOMURA-BPI Government Bonds

Nomura Research Institute, Ltd.

BPI-TIPS NOMURA-BPI plus Inflation-Linked Bonds

Nomura Research Institute, Ltd.

USGOV-H FTSE US Government Bond Index (JPY hedged/JPY basis) FTSE Fixed Income LLC
EGBI-HFTSE EMU Government Bond Index (JPY hedged/JPY basis) FTSE Fixed Income LLC

USMBS-H Bloomberg Barclays US MBS Fixed Rate Index (JPY hedged/JPY basis) Bloomberg Index Services Limited
WGBI

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

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

FTSE Fixed Income LLC

EGBI

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

G-AGGEXC

Bloomberg Barclays Global Aggregate Index(not incl. JPY, CNY, no hedge/JPY basis)

Bloomberg Index
Services Limited

USAGG

Bloomberg Barclays US Aggregate Index(no hedge/JPY basis)

Bloomberg Index
Services Limited

EUROAGG

Bloomberg Barclays EURO Aggregate Index (nohedge/JPY basis)

Bloomberg Index
Services Limited

USHY2％

Bloomberg Barclays US Corporate High Yield 2%
Issuer Capped Bond Index (no hedge/JPY basis)

Bloomberg Index
Services Limited

CBJ

MO-GD

343.8

MTBJ

MSCI-E

143.4

MTBJ

MSCI-K

844.0

MTBJ

MSCI-K

1,216.1

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

MTBJ

MSCI-K

706.8

Mitsubishi UFJ Trust and Banking
Corporation Ⅵ

MTBJ

MSCI-A

1,228.2

UBS Asset Management (Japan) Ltd ⅡMTBJMSCI-K

1,242.9

Lazard Japan Asset Management K.K. Ⅱ

MTBJ

MSCI-E

85.6

SSTB

—

87.6

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

Foreign bonds

FTSE US Government Bond Index 1-3years (no hedge/JPY basis) FTSE Fixed Income LLC

Legal & General Investment
Management Japan KK Ⅳ

(Massachusetts Financial Services
Company)

EUROHY Bloomberg Barclays EURO Corporate High Yield 2% Bloomberg Index
2％
Issuer Capped Bond Index (no hedge/JPY basis)"
Services Limited
EMBIGD(UBS Asset Management (UK) Ltd)DBJ Asset Management Co., Ltd.
Gatekeeper : Nomura AssetManagement Co., Ltd. Ⅸ
Fund of Funds Manager : Pantheon

SSTB

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

SSTB

—

294.4

SSTB

—

165.0

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

—

189.2

Gatekeeper : Neuberger Berman East
Asia Limited
Fund of Funds Manager : NB
Alternatives Advisers LLC

SSTB

Gatekeeper :Mitsubishi UFJ Trust andBanking Corporation Ⅶ
Fund of Funds Manager : Hamilton
Lane Advisors, L.L.C.

SSTB

—

5.2

SSTB

—

24.4

(Unit Trust Manager : Nissay AssetManagement Corporation)

31.5

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

SSTB

—

352.9

Mitsubishi UFJ Trust and Banking
Corporation Ⅷ

SSTB

—

191.9

35 asset managers, 115 Funds——

186,144.9

J.P.Morgan
Securities LLC

TOPIX

TOPIX (incl. dividends)

Tokyo Stock Exchange, Inc.

RN-P

RUSSELL/NOMURA Prime Index (incl. dividends)

Nomura Research Institute, Ltd.

RN-V

RUSSELL/NOMURA Large Cap Value Index (incl. dividends) Nomura Research Institute, Ltd.

RN-S

RUSSELL/NOMURA Small Cap Index (incl. dividends) Nomura Research Institute, Ltd.

RN-SG

RUSSELL/NOMURA Small Cap Growth Index (incl. dividends) Nomura Research Institute, Ltd.

MSCI-JS MSCI Japan Small (incl. dividends)
MSCI-IRMSCI G.K.

MSCI Japan IMI Equity REITS Index (incl. dividends) MSCI G.K.

MSCI-ESG MSCI Japan ESG Select Leaders Index

MSCI G.K.

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

FTSE-BL FTSE Blossom Japan Index

Foreign equities

In-house investment Ⅶ—

Domestic equities(Lazard Asset Management LLC)

J.P. Morgan EMBI Global Diversified(no hedge/JPY basis)

GBI-EMGD- J.P. Morgan Government Bond Index-Emerging Markets Global Diversified Index J.P.Morgan(not incl. China, no hedge/JPY basis)
Securities LLC
EXC(Baillie Gifford Overseas Limited)

95

MTBJ

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

MFS Investment Management K.K.

Total

The Master Trust Bank of Japan, Ltd.

33,571.4
81,124.7

USGOV
1-3Y

(former Mizuho Asset Management)(Wells Capital Management, Inc.)

Alternative
real estate

CBJ

USGOV

Asset Management One Co., Ltd. Ⅺ

Alternative
private equity

SSTB

Custody Bank of Japan, Ltd.

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

Alternative
infrastructureState Street Trust and Banking Co., Ltd.

(Note 1) While the 35 asset managers in the total column do not include
in-house investment, the 115 funds in the total column include
seven in-house investment funds.
(Note 2) The figure in the total market value column for funds managed
by asset managers (115 funds managed by 35 asset managers)
does not include accrued dividend income from closed funds(statutory trust accounts).
(Note 3) Figures in the market value column for custodians do notinclude accrued dividend income (foreign equities: ¥0.8 billion)
from closed funds (statutory trust accounts).
(Note 4) Manager benchmarks are shown in the following table and thesources of those benchmarks are as listed in the right-handcolumn of the following table.

(Legal & General Investment Management Limited)

Foreignequities active
investment

Marketvalue

Custodian, etc. name

Total

Domestic bonds

Foreignequities
passiveinvestment

Asset manager name(Subcontractor, etc.)

FTSE International Limited

SP-C

S&P/JPX Carbon Efficient Index

S&P Opco, LLC
Nomura Asset Management Co., Ltd.

RAFINomura RAFI Index

MSCI-AMSCI ACWI (not incl. JPY, JPY basis, incl. dividends,
MSCI G.K.
after taking into account GPIF dividend tax factors)

MSCI-A-EXC

MSCI ACWI (not incl. JPY,China A, JPY basis, incl. dividends,
MSCI G.K.
after taking into account GPIF dividend tax factors)

MSCI-KMSCI KOKUSAI (JPY basis, incl. dividends, after
taking into account GPIF dividend tax factors)

MSCI G.K.

MSCI-NMSCI North America (JPY basis, incl. dividends,
after taking into account GPIF dividend tax factors)

MSCI G.K.

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

MSCI-EMSCI EMERGING MARKETS (JPY basis, incl.
dividends, after deducting taxes)

MSCI G.K.

MSCI EMERGING MARKETS (not incl. China A, JPY
MSCI-EXCMSCI G.K.
basis, incl. dividends, after deducting taxes)
MSCI-A-ESG

MSCI ACWI ESG Universal (not incl. JPY, China A, JPY basis,
MSCI G.K.
incl. dividends, after taking into account GPIF dividend tax factors)

MO-GD

Morningstar Developed Markets ex-Japan Gender Diversity Index
Morningstar, Inc.
(JPY basis, incl. dividends, before deducting taxes)

SP-GC

S&P Global Ex-Japan LargeMidCap Carbon Efficient Index S&P Opco, LLC

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc.
Etc

［ 4 ］I n v e s t m e n t p e r f o r m a n c e b y m a n a g e r, e t c .
I nv e st men t p erf or mance (o ver t he las t y e a r ) (f ro m Apr il 2 0 2 0 to M arch 2 0 2 1 )Investment
methodDomestic
bonds
passiveinvestment

Domestic
bonds active
investment

Foreignbonds
passiveinvestment

Domestic
equities
passiveinvestment

Time-weighted return Benchmark return Excess rate of return Remarks(A)(B)(C)＝(A)－(B)columnAsset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)-0.70%-0.70%-0.00%

AllianceBernstein Japan Ltd.Ⅰ-1.79%-1.27%-0.52%

State Street Global Advisors (Japan) Co., Ltd.Ⅰ-0.74%-0.70%-0.04%-5.34%

BlackRock Japan Co., Ltd.Ⅰ-10.42%-5.08%

BlackRock Japan Co., Ltd. Ⅱ

2.47%

2.54%

-0.07%

BlackRock Japan Co., Ltd. Ⅲ-1.19%-1.27%+0.09%

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ-0.72%-0.70%-0.02%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ-0.88%-0.89%+0.00%

Mitsubishi UFJ Trust and Banking CorporationⅠ-0.83%-0.89%+0.06%

Resona Asset Management Co., Ltd.Ⅰ-16.05%-5.08%-10.96%

Resona Asset Management Co., Ltd. Ⅱ

2.60%

2.54%

+0.06%

In-house investmentⅠ-0.74%-0.70%-0.03%

In-house investment Ⅱ-0.89%-0.89%-0.00%

Asset Management One Co., Ltd. Ⅱ (former DIAM)-0.26%-0.69%+0.43%

Asset Management One Co., Ltd. Ⅲ (former Mizuho Trust & Banking)-0.20%-0.69%+0.49%MU Investments Co., Ltd.

-0.66%-0.69%+0.03%

Tokio Marine Asset Management Co., Ltd.

-0.47%-0.69%+0.21%PGIM Japan Co., Ltd.Ⅰ

0.03%-0.69%+0.72%PIMCO Japan LtdⅠ

-0.28%-0.69%+0.41%

Manulife Invetment Management (Japan) LimitedⅠ

1.26%-0.69%+1.95%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ-0.26%-0.69%+0.43%

Mitsubishi UFJ Trust and Banking Corporation Ⅱ-0.08%-0.69%+0.61%

In-house investment Ⅲ

0.40%

—

—

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

5.34%

5.43%

-0.09%

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

5.27%

5.43%

-0.16%

Nomura Asset Management Co., Ltd.Ⅰ

5.36%

5.43%

-0.07%

BlackRock Japan Co., Ltd. Ⅳ

5.39%

5.43%

-0.04%

BlackRock Japan Co., Ltd. Ⅴ

8.59%

11.70%-3.11%

BlackRock Japan Co., Ltd. Ⅵ-2.33%-2.16%-0.18%

BlackRock Japan Co., Ltd. Ⅶ-0.49%-0.40%-0.09%

BlackRock Japan Co., Ltd. Ⅷ

12.12%

12.15%-0.03%〇〇

BlackRock Japan Co., Ltd. Ⅸ

2.08%

2.05%

+0.03%〇

BlackRock Japan Co., Ltd. Ⅹ

0.30%

0.28%

+0.02%〇-0.11%

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ

5.33%

5.43%

Resona Asset Management Co., Ltd. Ⅲ

5.18%

5.43%

-0.25%

Resona Asset Management Co., Ltd. Ⅳ

11.99%

11.70%+0.29%

Resona Asset Management Co., Ltd. Ⅴ-2.32%-2.16%-0.16%

Resona Asset Management Co., Ltd. Ⅵ-0.47%-0.38%-0.09%

Resona Asset Management Co., Ltd. Ⅶ

12.05%

12.15%-0.10%

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

14.02%

7.35%+6.67%

Ashmore Japan Co., Ltd

26.61%

15.43%+11.18%

AllianceBernstein Japan Ltd. Ⅱ

26.13%

18.74%+7.39%

Goldman Sachs Asset Management Co., Ltd.Ⅰ

14.20%

8.20%+6.00%

Schroder Investment Management (Japan) LimitedⅠ

15.34%

8.20%+7.14%

Sompo Asset Management Co., LTD.

10.46%

8.20%+2.26%

T.Rowe Price Japan, Inc.

37.33%

33.93%+3.40%

Nomura Asset Management Co., Ltd. Ⅱ-1.49%

6.32%-7.81%

Nomura Asset Management Co., Ltd. Ⅲ

23.86%

21.89%+1.98%

PineBridge Investments Japan Co., Ltd.

27.06%

26.56%+0.49%BNY Mellon Investment Management Japan LimitedⅠ

15.66%

13.19%+2.47%PGIM Japan Co., Ltd. Ⅱ

14.95%

8.20%+6.75%PIMCO Japan Ltd Ⅱ

9.58%

6.16%

+3.42%FIL Investments (Japan) LimitedⅠ

14.81%

3.08%+11.72%BlackRock Japan Co., Ltd. Ⅺ

11.96%

5.97%+5.99%

Barings Japan Limited

26.19%

26.56%-0.37%

Manulife Invetment Management (Japan) Limited Ⅱ

12.30%

6.32%+5.98%Morgan Stanley Investment Management (Japan) Co., Ltd.Ⅰ

12.43%

7.23%+5.21%Morgan Stanley Investment Management (Japan) Co., Ltd. Ⅱ

28.21%

26.56%+1.65%UBS Asset Management (Japan) LtdⅠ

34.27%

32.98%+1.30%

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

22.06%

8.20%+13.86%

Asset Management One Co., Ltd. Ⅵ (former DIAM)
Asset Management One Co., Ltd. Ⅶ (former Mizuho Trust & Banking)Asset Management One Co., Ltd. Ⅷ
Nomura Asset Management Co., Ltd. Ⅳ
Nomura Asset Management Co., Ltd. Ⅴ
FIL Investments (Japan) Limited Ⅱ
BlackRock Japan Co., Ltd. ⅫBlackRock Japan Co., Ltd. ⅫⅠ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ

42.22%
43.39%
43.80%
5.08%
41.86%
42.10%
42.07%
43.92%
41.30%

42.13%
43.38%
43.93%
7.88%
41.78%
42.13%
42.13%
43.93%
42.13%+0.09%+0.01%-0.13%-2.81%+0.08%-0.03%-0.06%-0.01%-0.83%

Chapter 3

Foreignbonds active
investment

Asset manager name〇96

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc
Etc.

Investment
methodDomestic
equities
passiveinvestment

Domestic
equities
activeinvestment

Foreignequities
passiveinvestment

Foreignequities
activeinvestment

Asset manager name
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅵ
Mitsubishi UFJ Trust and Banking Corporation Ⅲ
Mitsubishi UFJ Trust and Banking Corporation Ⅳ
Mitsubishi UFJ Trust and Banking Corporation Ⅴ
Resona Asset Management Co., Ltd. Ⅷ
Asset Management One Co., Ltd. Ⅸ
Asset Management One Co., Ltd. Ⅹ (former Mizuho Asset Management)
Invesco Asset Management (Japan) LimitedⅠ
Invesco Asset Management (Japan) Limited Ⅱ
Capital International K.K.
Schroder Investment Management (Japan) Limited Ⅱ
Nikko Asset Management Co., Ltd.Ⅰ
Nikko Asset Management Co., Ltd. Ⅱ
Nomura Asset Management Co., Ltd. Ⅵ
Nomura Asset Management Co., Ltd. Ⅶ
Nomura Asset Management Co., Ltd. Ⅷ
FIL Investments (Japan) Limited Ⅲ
Sumitomo Mitsui DS Asset Management Company, LimitedⅠ
Lazard Japan Asset Management K.K.Ⅰ
Russell Investments Japan Co., Ltd.Ⅰ
State Street Global Advisors (Japan) Co., Ltd. Ⅲ
State Street Global Advisors (Japan) Co., Ltd. Ⅳ
State Street Global Advisors (Japan) Co., Ltd. Ⅴ
State Street Global Advisors (Japan) Co., Ltd. Ⅵ
State Street Global Advisors (Japan) Co., Ltd. Ⅶ
State Street Global Advisors (Japan) Co., Ltd. ⅧBlackRock Japan Co., Ltd. ⅪⅤ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ
Legal & General Investment Management Japan KKⅠ
Legal & General Investment Management Japan KK Ⅲ
Legal & General Investment Management Japan KK Ⅳ
Asset Management One Co., Ltd. Ⅺ (former Mizuho Asset Management)
MFS Investment Management K.K.
Nikko Asset Management Co., Ltd. Ⅲ
BNY Mellon Invetment Management Japan Limited Ⅱ
Mitsubishi UFJ Trust and Banking Corporation Ⅵ
UBS Asset Management (Japan) Ltd Ⅱ
Lazard Japan Asset Management K.K. Ⅱ

Time-weighted return Benchmark return Excess rate of return Remarks(A)(B)(C)＝(A)－(B)column41.77%
41.98%
38.79%
37.17%
41.84%
26.44%
77.02%
48.31%
23.72%
55.09%
45.74%
35.86%
28.87%
33.67%
50.28%
41.90%
54.54%
45.73%
31.66%
46.33%
59.88%
61.43%
48.45%
57.59%
60.85%
58.01%
59.94%
59.96%
60.31%
16.34%
13.13%
69.69%
56.01%
60.00%
51.55%
79.46%
51.82%
74.93%

41.95%
42.13%
38.90%
37.49%
42.13%
21.49%
43.55%
42.13%
25.02%
42.13%
42.13%
38.30%
25.02%
22.06%
38.90%
41.69%
42.13%
41.71%
22.06%
42.13%
60.10%
63.11%
48.84%
57.68%
62.49%
58.22%
60.10%
60.10%
60.10%
16.33%
13.14%
62.12%
59.72%
59.72%
59.72%
60.07%
59.72%
62.12%-0.18%-0.15%-0.11%-0.32%-0.30%+4.95%+33.47%+6.18%-1.31%+12.96%+3.60%-2.43%+3.85%+11.61%+11.38%+0.21%+12.41%+4.02%+9.60%+4.20%-0.23%-1.68%-0.39%-0.09%-1.64%-0.21%-0.16%-0.15%+0.21%+0.01%-0.01%+7.56%-3.70%+0.29%-8.17%+19.39%-7.89%+12.80%

〇

〇

〇
〇

〇

〇
〇

I nve s t m en t p er fo rman ce ( alt er n at ive ass e t s )Alternative
assetsInfrastructure

Private equity

Real estate

Investment style

Asset manager name

Global infrastructure
mandate focusing
DBJ Asset Management Co., Ltd.
mainly on opportunities
in Japan (Note 8)

IRR(local currency)

IRR
(JPY)

Local
currency

Start ofinvestment
March 2018

3.57%

3.57%

JPY

3.41%

4.00%

USD

April 2018

Global-Core

Nomura Asset Management Co., Ltd. Ⅸ

4.09%

5.86%

USD

February 2018

Global-Core

Sumitomo Mitsui DS Asset Management Company, Limited Ⅱ

2.30%

3.15%

USD

January 2018

Global-CoreIn-house investment Ⅵ

4.47%

3.73%

USD

February 2014

RemarkscolumnGlobal-Diversified
Strategy

Neuberger Berman East Asia Limited

—

—

USD

April 2020〇

Global-Diversified
Strategy

Mitsubishi UFJ Trust and Banking Corporation Ⅶ

—

—

USD

January 2021〇

Emerging marketsDiversified

In-house investment Ⅶ

4.81%

5.01%

USD

June 2015

Global-Core
Commingled Fund
Investments

Asset Management One Co., Ltd. Ⅻ

6.74%

8.23%

USD

September 2018

Mitsubishi UFJ Trust and Banking Corporation Ⅷ

5.70%

5.70%

JPY

December 2017

Japan-Core(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 as of the occurrence of the cash flow and is subject toexchange rate fluctuations throughout the investment period.
(Note 8) Domestic assets (major investment currency: JPY) are managed separately from foreign assets (major investment currency: USD).

97(Note 9) A circle in the remarks column indicates an external asset manager whose investment period is less than one year. The rates of investment return of eachexternal asset manager whose investment period is less than one year are rates for the investment period. However, in the case of alternative assets, only
the rates of investment return of portfolio assets that have been managed for more than one year are shown. (The "-" mark indicates portfolio assets thathave been managed for less than one year).

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc.
Etc

［ 5 ］I n v e s t m e n t f e e s ( 3 y e a r c u m u l a t i v e )（Unit：¥）
Investment
methodDomestic
bonds
passiveinvestment

Domestic
bonds active
investment

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

182,491,319

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

CBJ

149,147,024

BlackRock Japan Co., Ltd.Ⅰ

MTBJ

27,572,569

BlackRock Japan Co., Ltd. Ⅱ

MTBJ

18,968,448

Sumitomo Mitsui Trust Asset Management
Co., Ltd.Ⅰ

CBJ

259,221,312

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅱ

CBJ25,815,567

Mitsubishi UFJ Trust and Banking
CorporationⅠ

CBJ

33,303,728

Resona Asset Management Co., Ltd.Ⅰ

SSTB

36,932,915

Resona Asset Management Co., Ltd. Ⅱ

SSTB

44,094,524

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

CBJ

856,227,763

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

711,901,300

Asset manager name

MU Investments Co., Ltd.

CBJ

460,874,126

Tokio Marine Asset Management Co., Ltd.

CBJ

461,643,024

PGIM Japan Co., Ltd.Ⅰ

CBJ

479,028,198

PIMCO Japan LtdⅠ

CBJ

269,323,137

Manulife Investment Management (Japan)
LimitedⅠ

CBJ

874,614,999

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅲ

CBJ

664,048,844

Mitsubishi UFJ Trust and Banking
Corporation Ⅱ

CBJ682,797,133

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

SSTB

112,208,695

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

SSTB

132,542,590

Nomura Asset Management Co., Ltd.Ⅰ

MTBJ

64,713,368

BlackRock Japan Co., Ltd. Ⅳ

MTBJ

234,991,310

BlackRock Japan Co., Ltd. Ⅴ

MTBJ

14,482,776

BlackRock Japan Co., Ltd. Ⅵ

MTBJ

124,289,785

BlackRock Japan Co., Ltd. Ⅶ

MTBJ

12,278,090

BlackRock Japan Co., Ltd. Ⅷ

MTBJ

92,864,661

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅳ

SSTB

29,140,917

Resona Asset Management Co., Ltd. Ⅲ

SSTB

39,622,999

Resona Asset Management Co., Ltd. Ⅳ

SSTB

2,902,676

Resona Asset Management Co., Ltd. Ⅴ

SSTB

45,624,117

Resona Asset Management Co., Ltd. Ⅵ

SSTB

6,749,015

Resona Asset Management Co., Ltd. Ⅶ

SSTB

39,821,171

Remarkscolumn（Unit：¥）
Investment
methodForeignbonds active
investment

Domestic
equities
passiveinvestment

Custodians

Investment
fees

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

SSTB

2,346,236,807

Ashmore Japan Co., Ltd

SSTB

1,373,942,050

AllianceBernstein Japan Ltd. Ⅱ

SSTB

234,793,404

Goldman Sachs Asset Management Co.,
Ltd.Ⅰ

SSTB

1,228,293,822

Schroder Investment Management(Japan) LimitedⅠ

SSTB

2,180,406,035

Sompo Asset Management Co., LTD.

SSTB

1,011,353,077

Nomura Asset Management Co., Ltd. Ⅱ

SSTB

1,224,546,568

Nomura Asset Management Co., Ltd. Ⅲ

SSTB

328,325,224

BNY Mellon Investment Management
Japan LimitedⅠ

SSTB

2,305,441,135

PGIM Japan Co., Ltd. Ⅱ

SSTB

3,117,545,261

PIMCO Japan Ltd Ⅱ

SSTB3,357,483,653

FIL Investments (Japan) LimitedⅠ

SSTB

8,240,316,459

BlackRock Japan Co., Ltd. Ⅺ

SSTB

1,251,096,797

Manulife Investment Management (Japan)
Limited Ⅱ

SSTB

626,039,748

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

SSTB

2,695,738,335

UBS Asset Management (Japan) LtdⅠ

SSTB

658,383,066

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

SSTB

2,472,900,026

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

CBJ

478,398,018

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

26,821,473

Asset Management One Co., Ltd. Ⅷ

CBJ

85,148,126

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

CBJ

95,644,414〇

Goldman Sachs Asset Management Co.,
Ltd. Ⅱ

CBJ

2,066,588,700〇

Nomura Asset Management Co., Ltd. Ⅴ

CBJ

4,422,995,470

FIL Investments (Japan) Limited Ⅱ

MTBJ

91,525,285

Asset manager nameBlackRock Japan Co., Ltd. Ⅻ

CBJ

63,629,166

BlackRock Japan Co., Ltd. ⅫⅠ

CBJ90,121,080

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅴ

CBJ

29,040,915

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅵ

CBJ

173,359,915

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅷ

CBJ

58,732,767

Mitsubishi UFJ Trust and Banking
Corporation Ⅲ

CBJ

149,871,935

Mitsubishi UFJ Trust and Banking
Corporation Ⅳ

CBJ

347,655,277

Mitsubishi UFJ Trust and Banking
Corporation Ⅴ

CBJ

257,015,362

Mitsubishi UFJ Trust and Banking
Corporation Ⅸ

CBJ

73,011,462

Resona Asset Management Co., Ltd. Ⅷ

MTBJ

15,617,309

RemarkscolumnChapter 3

Foreignbonds
passiveinvestment

Custodians

Investment
fees

〇

〇

98

Reference Data

1 Investment Assets by Investment Method and by Manager, Etc
Etc.

（Unit：¥）
Investment
methodDomestic
equities
activeinvestment

Foreignequities
passiveinvestment

Custodians

Investment
fees

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

CBJ

707,001,032

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

CBJ

511,542,733〇

Eastspring Investments Limited

CBJ

427,073,833〇

Asset manager name

Invesco Asset Management (Japan)
LimitedⅠ

CBJ

1,865,340,747

Capital International K.K.

CBJ

5,611,448,963

JPMorgan Asset Management (Japan)
LimitedCBJ

473,595,134

Schroder Investment Management(Japan) Limited Ⅱ

CBJ678,759,822

SEIRYU Asset Management Ltd.

CBJ

83,387,831

Nikko Asset Management Co., Ltd.Ⅰ

CBJ

221,176,991

Nomura Asset Management Co., Ltd. Ⅶ

CBJ

1,036,217,646

Nomura Asset Management Co., Ltd. Ⅷ

CBJ

903,430,540

FIL Investments (Japan) Limited Ⅲ

CBJ2,398,146,288

Sumitomo Mitsui DS Asset Management
Company, LimitedⅠ

CBJ

359,469,600

Russell Investments Japan Co., Ltd.Ⅰ

CBJ

2,141,625,252

Remarkscolumn（Unit：¥）
Investment
methodForeignequities
activeinvestment〇

Alternative
infrastructure

Alternative
real estate

Custodians

Investment
fees

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

MTBJ

2,053,244,169

MFS Investment Management K.K.

MTBJ

1,078,106,542

Nikko Asset Management Co., Ltd. Ⅲ

MTBJ

1,676,458,546

Nomura Asset Management Co., Ltd. Ⅺ

MTBJ

291,674,830

BNY Mellon Investment Management
Japan Limited Ⅱ

MTBJ

6,638,782,792

Mitsubishi UFJ Trust and Banking
Corporation Ⅵ

MTBJ 14,380,442,942

UBS Asset Management (Japan) Ltd Ⅱ

MTBJ

9,215,546,959

Lazard Japan Asset Management K.K. Ⅱ

MTBJ

609,460,020

DBJ Asset Management Co., Ltd.

SSTB

15,171,226

Nomura Asset Management Co., Ltd. Ⅸ

SSTB

389,591,295

Sumitomo Mitsui DS Asset Management
Company, Limited Ⅱ

SSTB

439,470,367

Asset Management One Co., Ltd. Ⅻ

SSTB

595,576,136

Mitsubishi UFJ Trust and Banking
Corporation Ⅷ

SSTB

339,375,130

Asset manager name

Remarkscolumn〇（Unit：¥）

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

MTBJ

548,815,990

Investment
methodState Street Global Advisors (Japan) Co.,
Ltd. Ⅳ

MTBJ

206,665,186

Custody

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

MTBJ

49,823,927

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

MTBJ

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

MTBJ

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

MTBJ

553,774,298

BlackRock Japan Co., Ltd. ⅪⅤ

MTBJ

459,487,878

Sumitomo Mitsui Trust Asset Management
Co., Ltd. Ⅶ

MTBJ

381,378,519

Legal & General Investment Management
Japan KKⅠ

MTBJ

577,131,866

Custodian, etc. name

Custodians Investment fees

State Street Trust and Banking Co., Ltd.

SSTB

9,951,529,739

Custody Bank of Japan, Ltd.

CBJ2,347,886,847

The Master Trust Bank of Japan, Ltd.

MTBJ

26,049,080,835

9,415,165

Nomura Asset Management Co., Ltd. Ⅹ(Domestic equities)

CBJ

3,280,000

13,789,342

BlackRock Japan Co., Ltd. ⅩⅥ(Domestic equities)

CBJ

5,090,767

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

CBJ

54,000BlackRock Japan Co., Ltd. ⅩⅦ(Foreign equities)

MTBJ

15,521,204

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

MTBJ

54,000Transition
management(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) Fees include consumption tax.
(Note 4) A circle in the remarks column indicates an external asset manager closed in fiscal 2020 with less than three years of investment period sinceApril 2018. The lists do not include funds, etc. that have less than three years investment history after the contract for these mandates, or
those that have three years or longer investment history after the contracts but to which there were no fee payment during the last three years.
(Note 5) Fees paid to custodians include certain fees 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 ¥257,150,146.

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

Asset class

Investment returns

Investment fees

Domestic
bonds

5,077,289,320

453,950,198

Foreignbonds

58,491,695,988

14,482,626,196

Foreignequities

24,566,691,282

5,103,686,827(Note 1) Returns in the table represent premium charges excluding fees.
(Note 2) Fees indicate management fees and agent fees.

99Reference Data

2

2 Factor Analysis of Excess Rate of Return

Factor Analysis of Excess Rate of Return［ 1 ］F a c t o r a n a l y s i s o f e x c e s s r a t e o f re t u r n o n t h e o v e r a l l a s s e t s(Unit:%)

Rate of return

Factor analysis of excess rate of return

Return of GPIF●

Benchmarkreturn●

Excess rateof return●-●

Asset allocation
factor

FY2006 FY2020

BenchmarkfactorFund factor

Other factors(including error)

3.86

3.89

-0.03

-0.03

+0.02

-0.01

FY2006

4.56

4.64

-0.08

-0.06

-0.00

-0.02

-0.03
-0.08

FY2007

-6.10

-6.23

+0.13

+0.17

-0.02

-0.02

+0.13

FY2008

-7.57

-8.45

+0.88

+0.90

-0.12

+0.11

+0.88

FY2009

7.91

8.54

-0.63

-0.70

+0.08

-0.01

-0.63

FY2010

-0.25

-0.02

-0.23

-0.26

+0.12

-0.09

-0.23

FY2011

2.32

2.59

-0.27

-0.19

-0.01

-0.07

-0.27

FY2012

10.23

9.00

+1.24

+1.40

+0.03

-0.19

+1.24

FY2013

8.64

7.74

+0.90

+0.92

-0.06

+0.04

+0.90

FY2014 from
Apr. 1 to Oct. 30

3.97

3.50

+0.46

+0.47

-0.03

+0.02

+0.46

FY2014 from
Oct. 31 to Mar. 31, 2015

8.19

9.98

-1.78

-1.99

+0.01

+0.19

-1.78

FY2015

-3.81

-3.81

+0.00

+0.21

-0.15

-0.06

+0.00

FY2016

5.86

6.22

-0.37

-0.66

+0.33

-0.04

-0.37

FY2017

6.90

7.26

-0.37

-0.36

+0.00

-0.01

-0.37

FY2018

1.52

1.92

-0.40

-0.38

+0.02

-0.04

-0.40

FY2019

-5.20

-4.94

-0.25

-0.20

-0.05

-0.00

-0.25

FY2020

25.15

24.83

+0.32

+0.15

-0.03

+0.32

-0.17

+0.37

(Note 1) The annual rate of return of GPIF’s investment and benchmark rate of return represent the geometric mean of the rates of return in individual fiscal
years (an annualize rate).

Chapter 3(Note 2) From fiscal 2006 to fiscal 2007, an analysis was conducted on the difference between the rate of return (time-weighted rate of return) on the funds
invested in the markets (hereinafter “market investment”) and the compound benchmark return rate. From fiscal 2008 to fiscal 2019, an analysis has
been conducted on the difference between the rate of return on overall invested assets (market investment and investments in Fiscal Investment and
Loan Program (FILP) Bonds) (modified total return rate) and the compound benchmark return rate. For fiscal 2020, an analysis has been conducted on
the difference between the rate of return on overall invested assets (market investment and investments in FILP bonds) (time-weighted rate of return)and the compound benchmark return rate.

［ 2 ］Factor analysis of excess rate of return on domestic bonds (by manager benchmark, etc.)(Unit: %)NOMURA-BPI NOMURANOMURA-BPI
government
BPI/ GPIF(excluding ABS)
bonds
Customized(passive)(passive)(passive)

U.S.
government
JPY hedged(passive)

Europegovernment
JPY hedged( passive)

NOMURA-BPI
U.S. MBS
Inflationplus InflationAlternative
JPY hedged
Linked bonds
Linked bonds(active)(passive)(active)(active)

Shortterm assets(others)

Total

Benchmarkfactors

0.00

-0.05

-0.07

-0.10

+0.05

-0.02

+0.00

+0.09

0.00

+0.03

-0.05

Fund factors

-0.01

+0.00

-0.00

-0.04

-0.00

-0.00

+0.09

-0.01

+0.03

+0.01

+0.06

(Note 1) The benchmark of domestic bonds is NOMURA–BPI [excluding ABS].
(Note 2) Benchmark factors refer to those resulting from differences in the rates of return between manager benchmarks and the benchmark(NOMURA–BPI [excluding ABS]). They are calculated taking into consideration the market total average balance of each fund.
(Note 3) 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.

100Reference Data

2 Factor Analysis of Excess Rate of Return［ 3 ］Factor analysis of excess rate of return on foreign bonds (by manager benchmark, etc.)(Unit: %)

U.S.
U.S.
EuropeU.S.
government
government 1-3years government high–yield(passive)(passive)(passive)(passive)

WGBI(passive)

WGBI
others(passive)

Europehigh–yield(passive)

Benchmark factors

0.00

+0.07

-1.35

-0.04

+0.55

+0.01

+0.00

Fund factors

-0.01

-0.02

-0.02

-0.00

-0.00

+0.00

-0.00

Globalaggregate(active)

U.S.
aggregate(active)

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

Europehigh–yield(active)(Unit: %)Emerging
Emerging
Short-term
U.S. dollar local currency Alternative
assets(active)(active)(active)(others)

Total

Benchmark factors

+0.54

-0.08

+0.18

+0.14

+0.14

+0.03

+0.05

0.00

-0.02

+0.21

Fund factors

+1.04

+0.30

+0.05

+0.01

+0.01

+0.02

+0.06

+0.02

-0.00

+1.44

(Note 1) The benchmark of foreign bonds is FTSE World Government Bond Index [not incl. JPY, no hedge/JPY basis].
(Note 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.
(Note 3) 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.

［ 4 ］Factor analysis of excess rate of return on domestic equities (by manager benchmark, etc.)(Unit: %)TOPIX(passive)

JPX Nikkei
400(passive)

RUSSELL/NOMURAPrime(passive)

MSCI
MSCI Japan MSCI Japan
JAPAN IMI ESG Select Empowering
REIT
Leaders
Women(passive)(passive)(passive)

FTSE
BlossomJapan(passive)

S&P/JPX
CarbonEfficient(passive)

S&P GIVI
Japan(passive)

NOMURA
RAFI(passive)

Benchmark factors

0.00

+0.03

+0.05

+0.01

-0.13

-0.12

+0.06

-0.01

-0.50

-0.08

Fund factors

-0.15

-0.00

+0.00

-0.00

-0.00

-0.01

-0.00

-0.01

+0.03

+0.00

(Unit: %)TOPIX(active)

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

Total

Benchmark factors

0.00

-0.07

-0.01

-0.00

-0.00

0.00

-0.79

Fund factors

+0.28

+0.00

+0.02

+0.08

+0.00

-0.03

+0.21

(Note 1) The benchmark of domestic equities is TOPIX [incl. dividends].
(Note 2) Benchmark factors refer to those resulting from differences in rates of return between manager benchmarks and the benchmark (TOPIX [incl.
dividends]). They are calculated taking into consideration the market total average balance of each fund.
(Note 3) 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.

［ 5 ］Factor analysis of excess rate of return on foreign equities (by manager benchmark, etc.)(Unit: %)MSCIEmerging S&P Carbon ACWI ESG(passive)(passive)
Universal(passive)

ACWI(passive)

North
America(passive)

Europe &Middle East
(passive)

Morningstar
Gender Diversity(passive)

Pacific(passive)

Benchmark factors

-0.09

+0.12

-0.10

-0.00

-0.09

-0.10

+0.00

-0.00

Fund factors

-0.10

-0.09

-0.00

-0.00

-0.00

-0.01

-0.00

-0.00

ACWI
(active)

Developed(active)

Emerging(active)

Alternative(active)

Total(Unit: %)Benchmark factors

-0.00

-0.03

+0.04

+0.00

-0.26

Fund factors

+0.34

-0.37

-0.01

-0.27

-0.53

(Note 1) The benchmark of foreign equities is MSCI ACWI [not incl. JPY, JPY basis, incl. dividends, after taking into account GPIF dividend tax factors].
(Note 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 themarket total average balance of each fund.

101(Note 3) 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.

Reference Data

3

3 Portfolio Holdings by Asset Category as of Mar. 31, 2021

Portfolio Holdings by Asset Category as of Mar. 31, 2021

These are lists to summarize the GPIF’s top 10 portfolio holdings as of March 31, 2021 (as of the end of fiscal 2020),
either indirectly through external asset managers or directly with the GPIF’s in-house capacity for bonds, by name forbonds and equities.
These do not purport to represent GPIF’s evaluation of individual companies.
Domestic bonds holdings in order of market value
No.

Security nameDomestic equities holdings in order of market valueMarket value(¥100 million)

No.

Security nameSharesMarket value(¥100 million)1

10-year Inflation-Indexed Bonds JGB #20

10,313

1

TOYOTA MOTOR CORP.

176,025,100

15,351

2

Fixed-rate Bonds JGB #360

7,105

2

SONY CORP.

106,030,500

12,3263

10-year Inflation-Indexed Bonds JGB #21

6,189

3

SOFTBANK GROUP CORP.

117,442,400

10,981

4

Fixed-rate Bonds JGB #146

5,650

4

KEYENCE CORP.

16,285,600

8,203

5

10-year Inflation-Indexed Bonds JGB #19

5,409

5

RECRUIT HOLDINGS CO., LTD.

129,609,100

7,013

6

Treasury Discount Bills #976

4,726

6

MITSUBISHI UFJ FINANCIAL GROUP, INC.

1,127,717,900

6,814

7

Fixed-rate Bonds JGB #145

4,542

7

SHIN-ETSU CHEMICAL CO., LTD.

33,115,900

6,206

8

Fixed-rate Bonds JGB #361

4,169

8

NIPPON TELEGRAPH & TELEPHONE CORP.

204,951,500

5,938

9

Fixed-rate Bonds JGB #351

3,512

9

TOKYO ELECTRON LTD.

12,184,200

5,747

10

10-year Inflation-Indexed Bonds JGB #22

3,449

10

NINTENDO CO., LTD.

8,936,300

402,976

Total

Total

4,983 securities

Foreign bonds holdings in order of market value
No.

Security name2,417 securities

5,619
468,551

Foreign equities holdings in order of market valueMarket value(¥100 million)

No.

Security nameSharesMarket value(¥100 million)

US TREASURY N/B 0.875PCT 15NOV30

2,495

1

APPLE INC

114,767,078

15,491

2

FIDELITY US BANK LOAN FUND

2,036

2

MICROSOFT CORP

54,511,254

14,202

3

Fannie Mae or Freddie Mac 3PCT APR21

1,979

3

AMAZON.COM INC

3,106,442

10,621

4

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

1,797

4

FACEBOOK INC-CLASS A

16,514,402

5,375

5

US TREASURY N/B 1.5PCT 15AUG26

1,658

5

ALPHABET INC-CL C

2,200,792

5,031

6

FRANCE (GOVT OF) 2.5PCT 25MAY30

1,594

6

ALPHABET INC-CL A

2,147,357

4,894

7

Fannie Mae or Freddie Mac 2PCT APR21

1,582

7

TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

172,246,373

3,931

8

FRANCE (GOVT OF) FRTR 4 1/2 04/25/41

1,552

8

ALIBABA GROUP HOLDING-SP ADR

15,622,619

3,914

9

FRANCE (GOVT OF) FRTR 5 3/4 10/25/32

1,543

9

TESLA INC

5,260,241

3,882

10

US TREASURY N/B 2.875PCT 15AUG28

1,539

10

JPMORGAN CHASE & CO

21,546,516

492,649

Total

Total

9,846 securities

3,285 securities

Chapter 3

13,624
471,332

Alternative Assets holdings in order of market value
No.

Alternative Assets

Security nameMarket value(¥100 million)

1

Infrastructure

STEPSTONE G INFRASTRUCTURE OPPORTUNITIES, L.P.

2,944

2

Infrastructure

PANTHEON G INFRASTRUCTURE OPPORTUNITIES LP

1,892
1,650

3

Infrastructure

GLOBAL ALTERNATIVE CO-INVESTMENT FUND I

4Infrastructure

DG INFRASTRUCTURE, ILP

493

5

Infrastructure

DG INFRASTRUCTURE OPPORTUNITIES L.P.

383

1

Private Equity

TORANOMON PRIVATE EQUITY 1 AIV, L.P.

315

2

Private Equity

GLOBAL ALTERNATIVE CO-INVESTMENT FUND II

244

3

Private Equity

TORANOMON PRIVATE EQUITY 2 AIV, L.P.

52

1

Real Estate

CBRE GIP G REAL ESTATE INVESTMENTS, LP

3,529

2

Real Estate

MUTB G REAL ESTATE FUND

1,919

(Note) Security names are as of March 31, 2021.

102

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.

【3】Compliance with laws and maintaining highest professional ethics and integrity◆ 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.

20

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