ANNUAL REPORTFISCAL YEAR 2021

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.

3

We formulate our overall policy asset mix and manage risks at the portfolio,
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

1

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.

Table of Contents
Investment Result Summary and Topics in Fiscal 2021

3

Message from the Chairperson of the Board of Governors

5

Message from the President

6

Introduction of GPIF

7

Overview of Fiscal 2021

19

Review of Fiscal 2021 Investment Activities

21

Chapter 1

Investment Results in Fiscal 2021

1 Investment Results23

2 Overview of Policy Asset Mix

32

3 Basic Policy of Portfolio Risk Management40

4 Status of Investment in Each Asset Class45

5 Investment in Alternative Assets

47

6 Stewardship Responsibilities

58

7 ESG Activities

66

8 Other Major Initiatives

73

Chapter 2

Roles and Organizational Operation of Government Pension
Investment Fund

1 GPIF’s Roles in the Public Pension Scheme

79

2 Organization and Internal Control System

83

Chapter 3

Reference Data

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

89

2 Factor Analysis of Excess Rate of Return96

3 Portfolio Holdings by Asset Category as of Mar. 31, 2022

98

Investment results of Government Pension Investment Fund, including this annual report, are available on the 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 2021

For details, refer to pages 23-31.

Since Fiscal 2001

Fiscal 2021

¥

5.42%

3.69%

[annual rate]

Rate of return+

Returns¥10,092.5(Interest and dividend income)+[annual rate]+[annual returns]

billion[annual returns]¥105,428.8+(+¥3,198.3 billion)[cumulative returns]

billion[cumulative returns](+¥43,352.3 billion)¥

Fiscal 2021

Since Fiscal 2006

The excess rate of return-0.06%-0.03%(over the compound benchmark)

As of the end of fiscal 2021

¥196,592.6¥
Asset size

billionInside: policy asset mix (figures in parentheses indicate deviation limits)
Outside: at the end of March 2022

Foreign equities

25.11%¥50,770.0 billion¥

Domestic bonds

25%

(±7%)

26.33%¥53,235.7 billion

25%

(±7%)

50% 50%(±11%) (±11%)

Portfolio allocation(Pension reserves managed by
GPIF and the Pension Special
Account)

Domestic equities

24.49%¥49,513.7 billion

25%

(±8%)

25%

Foreign bonds(±6%)

24.07%¥48,678.4 billion(Unit: ¥billion)¥¥

Allocation changes for each asset
class due to rebalancing¥

Total fees

(The average fee rate on the total
investment assets)

3

Allocated/withdrawn

Domestic bonds

Foreign bonds+4,303.8+312.0

Domestic equities Foreign equities+1,222.1(Note) Each figure shows the net rebalancing amount.

35.2

billion(0.02 )%

-5,476.4

Topics in Fiscal 2021

1

Solid Investment Management Based on Policy Asset Mix

To steadily carry out investments based on the policy asset mix, GPIF conducts asset sales and purchases(rebalancing) in a timely and appropriate manner to ensure that the portfolio does not deviate from the asset
composition ratio specified in the policy asset mix, even when the economic and market environments are rapidlychanging.
In fiscal 2021, there was a phase of significant volatility in the financial markets as a whole due to a sharp rise inoverseas interest rates and Russia’s invasion of Ukraine. However, GPIF made efforts to manage risks by utilizing
stock index futures to reduce price volatility risk and to make efficient our rebalancing. As a result, the return forfiscal 2021 was +5.42%, marking the second consecutive year of positive returns.

2

Promoting Stewardship Activities and ESG Activities

GPIF promotes ESG (environmental, social, and governance) investments applies (ESG) considerations to ourinvestments to reduce negative externalities such as environmental and social issues, and to improve thesustainable return from whole assets.
In fiscal 2021, as a new initiative based on the revised Corporate Governance Code, GPIF asked the asset
managers to which we outsource our domestic stock investment to identify companies with “excellent TCFD
disclosures” and publicly announced the companies that received high evaluations. In addition, GPIF selected thefollowing ESG index for domestic equities and began passive management based on this index.
[Comprehensive index] FTSE Blossom Japan Sector Relative Index
For details, refer to pages 58-72.

3

Alternative Investments to Gain Momentum

GPIF has steadily been increasing exposure to alternative investments (infrastructure, private equity, and realestate) in expectation of greater portfolio diversification, seeking to improve investment efficiency and further
ensure the stability of pension finance.
Since 2014 when we began alternative investments, GPIF has steadily increased its asset balance while
improving its investment structure and, as of the end of fiscal year 2021, the market value of alternative assets
exceeded ¥2 trillion. In fiscal 2021 GPIF newly undertook investments in the following asset class:Private equity (Japan-Focused)
For details, refer to pages 47-57.

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 theexpertise of the Governors with a wide range of knowledge
and experiences.

The mission of GPIF is to manage pension reserves stably

mission of GPIF. Even as the COVID-19 pandemic showsand efficiently from a long-term perspective, solely for the

little sign of abating, international tensions are rising due tobenefit of the public, thereby contributing to the stability ofRussia’s invasion of Ukraine. Meanwhile, central banks inpension finance.

Europe, the U.S., and other countries are beginning to

The Board of Governors comprises ten members: thetighten monetary policy to curb inflation. Despite thesePresident of GPIF and nine outside experts with a broad

rapidly changing socioeconomic conditions, though, ourrange of pertinent knowledge and experience. The Board

mission remains unchanged. The Board of Governors isof Governors makes decisions on important policies

committed to devoting all of its energies for the benefit ofrelated to the management and investment of pension

the Japanese public by concentrating the wisdom of its

reserves including the formulation of the policy asset mix,

members in close collaboration with the Executive Officeand the management of the organization. In addition, theunder the leadership of the President.

Board of Governors supervises the Executive Office’s
business executions in cooperation with the Audit

I would sincerely appreciate your continuous
understanding and support.

Committee.
GPIF must always be a trustworthy organization for theJapanese public. To this end, it is most important toensure that the pension reserves are managed andinvested in an appropriate manner in accordance with the

Chairperson of the Boardof Governors
YAMAGUCHI Hirohide

Government Pension Investment Fund, Japan

5

UCHIDA Takakazu

ARAI Tomio

HORIE Sadayuki

KOMIYAMA Sakae

KATO Yasuyuki

YAMAGUCHI Hirohide

OHMI Naoto

NEMOTO Naoko

OZAKI Michiaki

MIYAZONO Masataka

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 Fundpolicy due to record-setting inflation and other factors,

is to contribute to the stability of the Employees’ Pension

yields on government bonds rose substantially in the

Insurance and National Pension schemes by managing

U.S. and other major countries, while yields on Japaneseand investing the pension reserves entrusted to us by thegovernment bonds remained relatively low as the Bank

Minister of Health, Labour and Welfare and by disbursingof Japan took a stance of continuing its accommodative

investment returns into the Pension Special Account.

monetary policy, and the yen depreciated against the U.S.

The investment result for fiscal 2021 was a positive

dollar and euro due to the widening gap between domestic

return of 5.42% due to the significant rise in foreign stock
markets and the depreciation of the yen.

and foreign long-term interest rates.
Bringing more than ¥105 trillion cumulative amount of

Although the stock markets of Germany and otherreturns since fiscal 2001, when GPIF started managing

countries declined due to Russia’s invasion of Ukraine

pension reserves. While, the returns constantly fluctuate,

and the resurgence of COVID-19 infections, foreign stock

GPIF is resolved to continue to comply with the Investment

markets on the whole rose as the U.S. stock markets andPrinciples and the Code of Conduct and fulfill its fiduciaryelsewhere climbed due to solid economic expansion andduty so that it can set aside the necessary amount ofother factors. On the other hand, domestic stock markets

pension reserves for the public pension scheme byremained mostly flat. In addition, as the Federal Reserve

managing assets from a long-term perspective without

Board shifted away from its accommodative monetary

being distracted by short-term market fluctuations. In
this annual report for fiscal 2021, we aim to improvefurther transparency by adding new analyses and relevant
information, as we did in the previous year, so that we canprovide a clearer picture of our activities.
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 in close collaboration with the Board ofGovernors.
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

What is a public
pension?

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.

A public pension is a scheme in which all citizens pay premiums to support each other inorder 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 avery important role as life-long support for elderly people.
For details of GPIF’s roles in the public pension scheme, refer to pages 79∙80.
(Note) The information is partly simplified for easy understandings. All the images in this section are for illustrative purposes only.

Q1
A

Will I get my contributions backas pension benefits in the future?
The public pension scheme in Japan
adapts the concept of “intergenerational
support,” whereby pension benefits for
elderly generations are paid from pension
premiums collected from contemporary
working generations. Therefore, the scheme
is not designed to cover your pension
benefits by your own premiums
accumulated in advance.

Q2
A

For details, refer to page 8.

Q3 What does GPIF do?
A

GPIF is an organization managing andinvesting pension reserves to increase thesource of pension benefits for future
generations.

For details, refer to page 10.
7

How will the pension system
work as the declining birthrate
and the aging population?
Since there will be fewer contributions fromthe working generation to cover thepensions for the elderly generation, it will benecessary to make up the shortfall. The
pension system reflects changes in thetimes, such as the growing number of
employed elderly people and women, toimprove its sustainability. In addition, thesystem is designed to stabilize pension
finance by utilizing pension reserves.
For details, refer to page 9.

Q4
ACan the amount of benefits to be
paid in the next year be affected bythis year’s investment performance?
What GPIF invests is the funds “reserved for
future generations.” Therefore, the amountof benefits to be received in the next year
will not be affected regardless of whether
the investment performance in this year is
positive or not.
For details, refer to page 10.

POINT

1First, 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
Contributions
Current

working
generation

Pensionbenefits

Pensionpremiums
Contributions
Futureworking
generation

Under the public pension scheme in Japan, pension benefits for the elderly generations
are paid by pension 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 generationsof their children and grandchildren. The scheme is not designed 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

P O INT

2

What would happen to thepension scheme as the
population of Japan decreases?
If the declining 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 working generation has decreased, oursociety has seen a change its way in which people work longer and in more diversified
ways: e.g. the elderly employees increases as people’s healthy lifespan becomes
longer and female employment rate is increasing. By reflecting on these changes to thedesign of the scheme, the sustainability of the pension scheme has been improved. In
addition, pension reserves are planned to be used to supplement the potential shortageof pension funds for future benefit payments when necessary, so that we can 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POINT

3

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 thetotal pension funds are estimated to come from the pension reserves.

Secure funds throughinvestment returns

Role of the pension reserve

Pensionreserve
Covers deficit

Pension payment
sources

SurplusPensionpremiums

Covers deficit

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 the investment 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 of the next year will not increase. Likewise, even if the investment result of thisyear is negative, the amount of pension benefit payment of the next year will not be reduced.

10

2. About investments of thepension reserves
To ensure stable earnings from its
investments, GPIF keeps in mind as
follows.

P O INT

1

GPIF employs long-term investment
and diversified investment as ourprinciple investment strategies
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¥
Actual as of March 31, 2020¥

¥479 trillion¥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 33.

11

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, being about ¥200 trillion. This allows us
to invest in a wide range of domestic and foreign assets, carefully taking into account the potential impactsof our investments on markets and corporate management.

Put all your eggs into
one basket

Divide them into
multiple baskets

When something happens...

All breakto diversify risks

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

12

P O INT

2

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 the long 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%

5050
%% 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 of the constant market fluctuation,
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 that the actual allocations are within the deviation limits.

13

POINT

3

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
the condition 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 investment returns required for pension
finance by investing mainly in domestic bonds.
Equities are exposed to greater price fluctuation risks than bonds in the short term, but could yield ahigher return from a longer perspective. At GPIF, we appropriately incorporate equities in our portfolio, sothat we aim to secure the investment returns required for pension finance with minimal risks by reaping
the fruits of Japanese and foreign corporation’s activities and the resulting economic growths in the formof “dividends” and “capital gains.”

10-years yields, U.S. & Japan(%)
8

US Government Bond 10-year Yield
Japanese Government Bond 10-year Yield

7
6
5
4
3
2
1
0
-1
1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

Dividends yields, Japan & Global(%)
8

MSCI-ACWI ex Japan dividends yield
TOPIX dividends yield

7
6
5
4
3
2
1
0
-1
1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

Would future withdrawals from the pension reserves (which leads todispositions of its equity holdings in the portfolio) negatively affect stock
prices, given the vast amount of GPIF’s equity holdings?
The pension reserves managed by GPIF are projected not to be withdrawn for the next 50 years or so.
(However, 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 to minimize the potential
market impacts of these dispositions associated with the withdrawals, while carefully assessing global
market trends.

14

4

P O INTGPIF invests in various types ofassets not only in Japan but
also in foreign countries.
For instance, a temporary fall in asset prices due to market fluctuations could be offset by asubsequent rebound, leaving the value of a portfolio unaffected in the long run. However, in somecases, a downward trend of asset prices could continue longer than 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 an opportunity of taking profit.
By investing in various types of assets not only in Japan but also in foreign countries, GPIF has conducted
its investment with an aim to increase opportunities for profits generated from global economic activities,
and simultaneously to mitigate the risk of material losses by controlling fluctuations in the overall valueof assets undermanagement thanks to the diversification.

Investment amount by country/region
Top 15 countries/regions by amount invested as of the end of March 2022 are as follows.
United Kingdom (¥trillion)
Netherlands (¥trillion)

2.7

4.8

2.1

1.1

Germany (¥trillion)

0.6

1.7

3.9

Canada (¥trillion)

1.0

1.0

2.9

2.6
1.6

South Korea (¥trillion)

Belgium(¥trillion)
0.1

China (¥trillion)
0.0

1.1

1.6

0.1
0.9

Japan (¥trillion)

0.8

1.6

1.0

Switzerland (¥trillion)
0.1

Bonds

46.0

1.4
1.3

Total

95.2

Equities

49.3

Taiwan (¥trillion)
0.0
1.0
1.0
United States (¥trillion)
France (¥trillion)
Spain

1.6

(¥trillion)

0.3

3.1
2.7

6.2
4.5

23.7

Italy (¥trillion)

0.3

Australia (¥trillion)

4.3
4.0

0.7

1.7

1.0

55.6
31.8

(Note 1) Equities are compiled mainly based on the company’s country of incorporation and the primary listing of its securities (Country
Classification for MSCI indexes), while bonds are compiled mainly based on the country where the issuer or the parent company of
the issuer is headquartered (Country Classification for Bloomberg indexes).
(Note 2) Cash and other assets temporarily remaining in the fund are excluded.

15

POINT

5

In addition to equities and bonds,
GPIF also invests in alternative assets.
Alternative assets are the generic term for investment assets that are “alternatives” to traditional
investment assets including listed equities and bonds. Among a variety of alternative assets, GPIF
invests in infrastructure (investments in renewable energy and other infrastructure projects), private
equity (investments in equities of private companies), and real estate (investments in real estate suchas logistics and retails).

Since alternative assets have different risk-return profiles from equities and bonds, holding themalongside equities and bonds can be expected to reduce the volatility of the overall returns on
assets. While they have lower liquidity in terms of buying and selling, they produce higher
investment returns for this reason.
Overseas pension funds have been promoting diversification by investing in alternative assets
for the aforementioned characteristics and effects. As a super-long-term investor, GPIF aims to
improve investment efficiency by holding equities and bonds that can be bought and sold quickly,
while steadily accumulating high-quality alternative assets with due attention to the market
environment and investment risks.

Total value of alternative assets up until fiscal 2021(¥billion)

2,400

2,158.6

2,200

Infrastructure

2,000Real estate

1,800

Private equity

1,078.8

1,600

1,341.9

1,400
1,200

944.5

1,000
800

432.7

400
0

773.1

545.1

600
200

736.2

0.2

5.5

2014/3

2015/3

544.7
213.0
293.5
380.8
83.3 1.9 100.6 4.2 196.88.1
18.5
14.3

81.4
2016/3

96.4
2017/361.0

8.2 124.9

2018/3

2019/32020/32021/3306.62022/3

16

POI NT

6

GPIF is undertaking stewardship activities
and ESG investment.
From the perspective of increasing long-term investment returns, GPIF pursues activities to fulfill ourstewardship responsibilities and promotes ESG initiatives.
In accordance with laws and regulations, GPIF’s ESG investments are not aimed at contributing to
the solution of social problems, but are promoted based on the concept of ensuring the economic
benefits of pension recipients from a long-term perspective by reducing the negative impact ofenvironmental and social problems on capital markets.

Stewardship responsibility refers to the responsibility of institutional investors to seek to increase longterm investment returns by adopting a long-term orientation and looking for sustainable growth among
the companies in their portfolios and markets on the whole. GPIF has been fully engaged in stewardship
activities since adopting Japan’s Stewardship Code in May 2014.
Since GPIF does not directly hold stocks but invests through external asset managers, as part of its
stewardship activities, GPIF has established the Stewardship Principles and the Proxy Voting Principles,
which require external asset managers to engage in “constructive dialogue” (engagement) with portfolio
companies, in consideration of ESG factors that contributes to sustainable growth.
ESG is an acronym for Environment, Social, and Governance.
ESG investment incorporates environmental, social, and corporate governance perspectives into
investment decisions with the expectation of improving long-term returns.
GPIF, both as a “universal owner” (broadly diversified investor in capital markets worldwide) and a“cross-generational investor” (a super-long-term investor), must ensure the sustainable and stable
growth of capital markets as a whole to earn stable returns over the long term. Based on this idea, GPIF
is engaged in ESG investment.

17

POINT

7

Risks are controlled appropriately toensure a long-term profitability.
The word “risk” is used in the sense of “danger” or “probability that an unfavorable situation will
occur.” 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 diagrams show
fluctuations in the return of both assets, suggesting that the greater the fluctuation, the higher the risk.

Annual return on Japan Equities and Japan Bonds from 1970 to 2021
Japan equities

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 Equities: 0.03%, Japan Bonds: 0.02%* No transaction costs in rebalancing nor taxes are assumed. Assumes reinvestments of interest income and dividend.
* Past performance is no guarantee of future results.
<Source> Japan Equities: Tokyo Stock Exchange 1st section weighted average return of market capitalization, Japan Bonds: NomuraBPI Overall.
Copyright ©2022 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 and is 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 futurestability of management of the national public pension system through stable and efficientmanagement from a long-term perspective. The Medium-term Objectives prescribed by the Ministerof Health Labour and Welfare (“MHLW”) stipulate that a pension reserve fund must achieve a long–term real return (net investment yield on the pension reserve fund less the nominal wage growthrate) 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.” In order to manage pension reserve fund safely and efficiently from a long-term
perspective, GPIF is conducting our investment with an aim to mitigate the risk of failing to achieve
the long-term investment return, by professionally analyzing various indicators, while taking into
consideration short-term fluctuations in returns due to temporary market fluctuations.
(Note) Out of the six long-term real investment yield assumptions stipulated in the 2019 fiscal verification, the largest value of 1.7% has
been set as the long-term investment target.

Comparison with planned reserves (long-term risk)
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

18Overview of Fiscal 2021
Investment Results

For details, refer to pages 23∙24.

Since Fiscal 2001

Fiscal 2021

¥

+5.42

+3.69

[annual rate]%

Rate of return%[annual returns](+¥10,092.5 billion)(Returns)[annual rate][Cumulative returns](+¥105,428.8 billion)

As of the end of fiscal 2021

¥196,592.6 billion¥
Asset size

(Note) Rate of return and returns are marked to market as of the end of fiscal 2021, and include unrealized gains and losses.

GPIF manages pension reserve fund with a long-term perspective. While short-term portfolio returns are influenced by thecurrent market trends, investment results should be monitored with a 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)
120,000

105,428.8
100,000

95,336.3

Capital gains

Cumulative returns
80,00063,441.3
50,733.8

40,00020,000013,425.8
537.8-587.4

1,189.6-3,040.5

2,021.1
1,851.1

4,463.8

4,474.9

17,370.3
6,115.5

11,852.5 10,315.7 12,509.4

3,127.0

14,602.6 16,636.7

11,689.3 11,389.4

8,116.4

20,751.8

13,998.6

18,610.7

57,537.7

45,423.9

35,441.5
25,220.9

53,360.3

23,005.0

25,547.4

28,080.830,859.7

33,900.6

37,141.2

40,154.0

43,352.3

Investment income (cumulative)

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 FY2021

19

Investment income

60,00065,820.8

Overview of Fiscal 2021

Contribution to Public Pension FinanceFor details, refer to page 25.

(cumulative)

¥

3.78%

[annual rate]

Real return on
investment for the whole
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 a 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 pages 79∙80.

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

10.0
8.0

Investment results for the whole reserve funds(cumulative yield from fiscal 2001 to the end of each fiscal year (annual rate))

6.0

3.78% (FY2021)

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 FY2021(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).

20

Review of Fiscal 2021 Investment Activities
Fiscal 2021 was a year that saw GPIF endeavored toreduce its portfolio risk and strengthen its risk management
in response to rapid market changes.
Revenue for fiscal 2021 exceeded ¥10 trillion, and therate of investment return for the fiscal year was +5.42%.
The real investment return over the 21 years since 2001,
when GPIF started its discretionary investment for thepension reserve funds, has been +3.78% (annualized), so
it continues to exceed the long-term investment target of“the nominal wage growth rate of +1.7%.” Quarterly
returns of the fiscal year were positive in all but the fourth
quarter. As a result, quarterly returns since 2001 havein fact been positive in over 70% of the 84 quarters,
reaffirming that the past and current policy asset mixes
have enabled GPIF to reap the fruits of economic growth
via long-term investment.
The excess rate of return was negative for the first timein two years at negative 6 basis points (down approximately
110 billion yen) due to the significant increase in market
volatility during the second half of the fiscal year. However,the cumulative total of the return for the fourth Medium-term
Plan target period was positive (+26 basis points). In termsof the last fiscal year’s excess rate of return, despite thepositive contributions of alternative assets and ESG indexbased investments, the negative outcome was posted dueto the foreign equity fund factor.
The market conditions changed significantly in thesecond half of the fiscal year. A policy shift from monetaryeasing to monetary tightening was made by the Federal
Reserve Board (FRB) in the U.S. and by central banks inother countries, and market volatility remained high fromthe third quarter. In addition, Russia’s invasion of Ukraine
also occurred in February. Responding to these changes,
GPIF strived to strengthen its risk management in theportfolio by managing its asset allocation based exactly on
the policy asset mix as much as possible in order to avoid
taking unnecessary risks.
Specific measures GPIF employed to reduce portfolio
risk include (1) reducing the ratio of corporate bonds
among its foreign bond allocation, (2) using stock priceindex futures to speed up its asset rebalancing, (3)reducing currency-hedged U.S. Treasuries due to concerns
over rising U.S. dollar interest rates, (4) excluding securities
with high settlement risk from benchmarks and reducing
these holdings, (5) reducing equity active fund balances,and (6) reviewing collateral accepted for bond lending andlending periods. As a result, the peak of VaR ratio (fordetails, page 42) for a fiscal year has been steadily declining
from 1.09 in fiscal 2019, to 1.05 in 2020, and 1.03 in
2021.

21

On the other hand, in terms of its alternative investments,
GPIF selected a new domestic private equity fund in fiscal
2021, and steadily increased its alternative asset balance,
exceeding ¥2.1 trillion at the end of the fiscal year, whichsurpassed 1% of total assets for the first time. In terms of
its ESG investment, the FTSE Blossom Japan Sector
Relative Index was newly selected, and consequently the
total number of ESG indexes adopted by GPIF now stands
at eight for domestic and foreign equities. As a result, thetotal amount of ESG investment based on our narrow
definition, which consists of passive equity investments
based on ESG indexes and investments in ESG thematicbonds such as green bonds, amounted to approximately¥13.7 trillion.
Although the market conditions remain challenging,
GPIF will continue striving for meticulous risk management
to achieve the goals of the fourth Medium-Term Plan. We
would sincerely ask the pension beneficiaries and theJapanese public at large for their understanding andsupport.
GPIF’s main risk reduction activities in its portfolio forfiscal 2021
(1) Reducing the ratio of corporate bonds among
foreign bond allocation
Although GPIF increased the ratio of corporate bonds
among its foreign bond allocation in response to widening
credit spreads in fiscal 2020, we decreased the ratioof corporate bonds to about 5% of total foreign bondallocation at the end of fiscal 2021. In particular, theamount of high-yield bonds held was reduced to less than
one-fifth of the peak amount at the end of fiscal 2021 bychanging investment guidelines and fund cancellations.
(2) Using stock price index futures to speed up asset
rebalancing
Rising volatility has made rebalancing among the four
asset classes a more important risk management objective
than ever. To secure the risk-return characteristics of thepolicy asset mix, GPIF has aimed to achieve flexible
rebalancing. To improve efficiency in its rebalancing, GPIF
has started to use stock price index futures as part of its
in-house investment since fiscal 2021. The use of stock
price index futures for GPIF’s in-house investment became
available by regulations in 2018, however it was not until
fiscal 2021 that they were first put to actual use. With due
care given to concerns about the use of futures, whichallow for large trades with small amounts of money (itmeans that GPIF can implement its trade with leverage),
GPIF has utilized stock price index futures with a condition
that the notional principal amount must be within a range

Review of Fiscal 2021 Investment Activitiesof the amount of cash held by GPIF when purchasing
stock price index futures so that no leverage is applied. By
doing so, GPIF makes sure that we use stock price index
futures as temporary substitutes for purchases of physicalshares. The use of stock index futures enhanced theefficiency of GPIF’s rebalancing, because it not only
shortens the time between the decision to buy or sell astock and the start of the execution of that trade, but also
allows GPIF to adjust the amount of the trade in line withstock market movements and to utilize the liquidity of
global markets open nearly round-the-clock for risk
management.
(3) Reducing currency-hedged U.S. Treasuries due toconcerns over rising U.S. dollar interest rates
GPIF manages the foreign currency exchange risk offoreign assets in an integrated manner by combining its
foreign bond and foreign equity portfolios. In addition,
GPIF manages the interest rate risk (i.e. duration risk) of its
foreign bonds for its entire foreign bond portfolio andforeign bonds with currency hedges classified as domestic
bonds in an integrated manner. Facing that the FRB was
expected to start raising its policy interest rate from March
2022, GPIF reduced its holdings of currency-hedged U.S.
bonds by approximately ¥1 trillion to reduce only theinterest rate risk from foreign bonds, without deviating theforeign currency exchange risk from the policy asset mix.
By doing so, GPIF achieved to lower the risk of interest
rate hikes in its overall portfolio.
(4) Excluding securities with high settlement risk frombenchmarks and reducing these holdings
GPIF invests in global markets, some of which are subject
to uncertainties in terms of settlement systems and otherfactors, particularly those in emerging countries. GPIF
pays due attention to such risks when managing its
portfolio in keeping with its objective of safe and efficientinvestment for the benefit of the pension beneficiaries.
Given the fact that the Chinese government bonds arescheduled for gradual inclusion in the World Government
Bond Index (WGBI) which is used by GPIF as the policy
and evaluation benchmark for its foreign bond investments,a decision was made at the 59th Board of Governors
meeting (held in September 2021) to exclude the Chinese
government bonds from this benchmark customized
for GPIF due to the bonds’ characteristics including
unavailability of an international settlement system (fordetails, refer to page 45).
Following the February 2022 invasion of Ukraine
by Russia, GPIF’s policy was reported to the Board ofGovernors at its 65th meeting (held in March 2022) that,from a risk management perspective, GPIF would suspend

new investments in Russia-related assets and sell existing
asset holdings at an appropriate time while closely
monitoring the situation. Specifically, following theexclusion of Russia-related assets from the benchmark by
the index company in March, the assets held by GPIF
have been sold by external asset managers while taking
liquidity and other factors into consideration. While someover-the-counter trading of Russia-related bonds has been
conducted outside Russia through overseas clearing
houses since March, trading and settlement of Russiarelated equities by non-Russian investors have been
restricted. Accordingly, GPIF’s Russia-related bondholdings have decreased significantly as of the end of
March while a certain level of Russian-related equity
holdings has been retained. Relating to this issue, GPIF
will continue to keep a close eye on the market environment.
(5) Reducing active equity fund balances
As shown in the rate of return factor breakdown (refer topage 28), the foreign equity fund factor had the greatest
impact on the excess rate of return in fiscal 2021. GPIF
is currently investing in the active foreign equity funds ofseven companies, all of which underperformed their
manager benchmarks for the year. The correlation of eachfund’s excess returns increased and market volatility rose
sharply during the second half of the fiscal year, so GPIF
reduced its active fund balance by a total of approximately ¥2trillion for risk management reasons. To avoid a concentrationof fund allocations and to achieve diversification effects inthe equity portfolio, it is necessary to increase the numberof active funds GPIF employs. For this purpose, GPIF has
proceeded with the selection of active funds in the North
American market, which offers the greatest number of
options. GPIF will move to achieve a diversification effectamong its active funds as fast as possible.
(6) Reviewing collateral accepted for bond lending andlending periods
GPIF earns income by lending out its bond holdings to
improve investment yields. To prevent GPIF from being
exposed to the credit risk of borrowers, it accepts anequivalent amount of securities as collateral for its bondlending. At the beginning of fiscal 2021, it was reported in
the media that several securities companies in the U.S.
market had lent bonds to a borrower that subsequently
went bankrupt, resulting in large losses due to delays inselling the collateral. To avoid a similar risk, GPIF reviewed
the types of collateral GPIF accepts and the lending
periods for bonds on the conservative side.
Executive Managing Director (Management andInvestment Operations)/CIO

UEDA Eiji

22

Chapter 1 Investment Results in Fiscal 2021
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 2021 is

The amount of investment returns for fiscal 2021 is+5.42%+¥10,092.5 billion

.

1Q
Total

Domestic bonds

Foreign bonds

Domestic equities

Foreign equities

.

2Q

3Q

4Q

Total

2.68%

0.98%

2.81%

-1.10%

5.42%¥4,982.0 billion¥1,876.3 billion¥5,437.2 billion-¥2,203.1 billion¥10,092.5 billion

0.47%

0.11%

-0.02%-1.54%-0.99%¥209.0 billion¥50.1 billion-¥7.5 billion-¥747.6 billion-¥496.0 billion

1.87%-0.85%

2.52%-1.22%

2.29%¥887.3 billion-¥409.1 billion¥1,207.2 billion-¥613.0 billion¥1,072.4 billion-0.25%

5.35%-1.62%-1.22%

2.12%-¥105.1 billion¥2,591.9 billion-¥808.1 billion-¥591.6 billion¥1,087.1 billion

8.62%-0.77%

10.54%-0.55%

18.48%¥3,990.8 billion-¥356.5 billion¥5,045.6 billion-¥250.8 billion¥8,429.0 billion(Note 1) GPIF manages and invests its assets at the market value. 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) Investment returns are gross of fees (the same shall apply hereinafter).
(Note 3) 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 4) Alternative asset funds contain a mixture of asset classes, and the investment returns of such funds are allocated to each asset on a pro-rata basis
according to the targeted asset composition ratio in the investment plan at the start of investment of such funds (the same shall apply hereinafter).
(Note 5) The rate of time-weighted investment return on total alternative assets for fiscal 2021 is 21.37% (infrastructure at 20.80%, private equity at 28.83%, andreal estate at 20.25%).
(Note 6) Due to rounding off, the sum of each item in individual quarters does not necessarily match the total number for the fiscal year.
(Note 7) Fiscal 2021 runs from April 1, 2021 to March 31, 2022.

23

Cumulative returns and asset size since fiscal 2001
Cumulative returns from fiscal 2001 to fiscal 2021 are
Chapter 1+¥105,428.8 billion
and the value of investment assets at the end of fiscal 2021 is¥196,592.6 billion.

Cumulative return(¥billion)

120,000+105,428.8+95,336.3

100,000
80,000+63,441.3 +65,820.8
60,000+50,733.8 +53,360.3+35,441.5

40,000+57,537.7+45,423.9+25,220.9+17,370.3+13,425.8+11,852.5 +11,689.3 +13,998.6+4,463.8+2,504.3+1,851.1+11,389.4

20,0000–20,000-587.4 -3,040.5
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Asset size(¥billion)

196,592.6

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 FY2021(Note) Investments using FILP bonds were terminated during fiscal 2020.

24

Investment Results in Fiscal 2021

1 Investment Results

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

whole pension reserves

after fiscal 2015 is(Note1)

is

3.78%

+1.7%

for the 21 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 pages 79∙80.
(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 objective is +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 reserve funds(cumulative yield from fiscal 2001 to theend of each fiscal year (annual rate))

8.0

3.78% (FY2021)

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 FY2021

Investment performance for the whole pension reserves(Unit:%)

Performance

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Nominal investment return

1.94

Nominal wage growth rate

–0.27 –1.15 –0.27 –0.20 –0.17

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

4.90

5.18

2.73

2.94

6.83

7.01

3.10 –3.53 –6.86

7.54 –0.26

Last21years(annualized)

2.17

9.56

8.23 11.62 –3.64

5.48

6.52

1.43 –5.00 23.98

5.17

3.71

0.68 –0.21

0.21

0.13

0.50

0.03

0.41

0.95

0.70 –0.51

1.26

–0.07

9.33

8.09 10.53 –4.12

5.45

6.09

0.48 –5.66 24.62

3.86

3.78

2.39

0.99

(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) Long-term investment targets are the geometric means of cumulative yield from fiscal 2001 to the end of each fiscal year (annualized).

25

Investment Results in Fiscal 2021

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, 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 2021, the total amount of investment income is¥3,198.3 billion (rate of return: +1.63%),
and the cumulative amount of investment income for the 21 years since fiscal 2001, when GPIF started managing
pension reserves, is¥43,352.3 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)

120,000

105,428.8
100,000

95,336.3

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

40,00020,0000–20,000

35,441.5

53,360.3

45,423.9

65,820.8

57,537.7
43,352.3
40,154.0
33,900.6
30,859.7
37,141.2

25,547.4
25,220.9
28,080.8
20,751.8
16,636.7
17,370.3
23,005.0
14,602.6
11,852.5
13,425.8
12,509.4
18,610.7
10,315.7
13,998.6
4,463.8
6,115.5
11,389.4
Investment income (cumulative)
4,474.9
11,689.3
8,116.4
537.8 1,189.6 2,021.1
1,851.1 3,127.0-587.4-3,040.5

2,504.3

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

26

Investment Results in Fiscal 2021

1 Investment Results

Investment income(¥billion)

(%)

3,500

2.80
Foreign equities

3,250

2.15%

Domestic equities
Foreign bonds

1.91%

Domestic bonds

3,000

1.78%
1.89%

2,500

1.87%
1.79%

2,250

1.30%
1.18%

1.27%

1.31%

210.6

1,000
107.2
99.2
69.6
64.4 135.7
77.8

750
45.4
44.7
54.4
390.5

162.2

165.3

123.9

247.7

210.2

266.3

234.3

398.3

438.1

976.1

401.4

771.4

1.80

753.4

1.60

530.0
1,017.9

360.4

324.8

353.1

2.00

869.9

982.0

266.0
366.6

907.0
445.7

607.5

684.3

946.8

782.4

1.00
320.0

383.8

338.5

420.4
490.4

1,255.9

1,038.4

1,180.9

1,076.1

827.5

1.40
1.20

331.1

399.5

1,225.7
720.8

323.5

303.2

244.1

192.8

626.3
439.0

318.3

263.7

1,250

500

292.4

1.43%

1.39%

1.69%

301.1

2.20

846.2

1.75%

1.64%
1.64%

308.8

1,500

0

1.79%

1.67%

2,000

250

1.80%

839.3

1,038.2

2.60
2.40

Investment income

2,750

1,750

1.63%
1.62%

968.3

952.4

855.1

488.5

0.80
517.8

628.2

719.8

818.9

1,012.6

892.3

0.60
0.40

672.3

577.9

498.4

438.9

402.0

0.20

328.5

327.5

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

0.00(Unit: ¥billion)

Cumulative

Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities

15,290.9

Total

43,352.3

FY2001

FY2007

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

827.5

1,038.4

1,225.7

1,255.9

9,134.5

54.4

77.8

135.7

192.8

247.7

338.5

399.5

398.3

401.4

9,086.7(1.68%)

9,825.6(2.18%)

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(1.21%)(3.07%)

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%)(3.96%)

234.3(1.59%)

301.1(1.52%)

353.1(3.75%)

266.0(1.98%)

292.4(1.81%)(1.99%)(1.96%)(2.09%)(2.92%)(3.40%)(2.27%)(2.23%)(1.64%)(1.39%)(1.30%)(1.18%)

831.4

1,106.0

1,347.9

1,640.7

2,000.8

2,199.4

2,193.7

2,093.2

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021(1.27%)(1.31%)

Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities

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

Total

2,034.1

1,973.9

2,141.1

2,253.2

2,542.4

2,533.4(1.50%)

331.1

968.3

(1.30%)

320.0

952.4

(1.36%)

383.8

855.1

(1.51%)

420.4

672.3

(1.27%)

490.4

577.9

(1.21%)

517.8(1.43%)

498.4(1.12%)

628.2(1.67%)

438.9(1.02%)

719.8(1.87%)

402.0(1.08%)

818.9(1.79%)

327.5(1.80%)

328.5(0.75%)(0.69%)(3.33%)(2.71%)(2.74%)(2.31%)(2.59%)(2.63%)(2.63%)(2.59%)(2.25%)(1.89%)

892.3

1,012.6

303.2

324.8

366.6

445.7

607.5

684.3

782.4

907.0

982.0

946.8

1,017.9(2.08%)(2.14%)(1.85%)(1.76%)(1.41%)(1.99%)(1.95%)(1.92%)(2.35%)(2.76%)(2.00%)

323.5

360.4

438.1

530.0

771.4

753.4

869.9

(2.25%)

976.1(2.33%)

1,038.2(2.79%)

846.2(1.77%)(1.65%)

2,778.9

3,040.9

3,240.6

3,012.8

3,198.3(1.79%)(1.64%)(1.69%)(1.64%)(1.89%)(1.75%)(1.78%)(1.91%)(2.15%)(1.62%)(2.06%)

839.3(1.63%)(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 amount of income earned on short-term assets (income gain) is included in the total by fiscal 2019; from fiscal 2020 onward, the yen-denominatedportion is included in domestic bonds and the foreign currency-denominated portion in foreign bonds.
(Note 3) The amount of income earned on currency-hedged foreign bonds (income gain) is included in domestic bonds from fiscal 2020 onward.
(Note 4) The amount of income earned on FILP bonds (income gain) is included in domestic bonds by fiscal 2020, the year to which FILP bonds were held.
(Note 5) The amount of income earned on convertible bonds (income gain) is included in domestic bonds for fiscal 2001.
(Note 6) The rate of return for each fiscal year is calculated by dividing the amount of return (income gain) for each asset by the amount of that asset undermanagement.
(Note 7) The annual rate of return (cumulative) represents the geometric mean of the rates of return for individual fiscal years (annualized).

27

Investment Results in Fiscal 2021

1 Investment Results

Factor analysis of difference from compound benchmark return
while the compoundbenchmark return was

The excess rate of return was

5.42%

5.47%

–0.06%

The average of the annual rate of
return for the 16 years since the
GPIF’s establishment in fiscal 2006 on
all investment assets waswhile the compoundbenchmark return was

The excess rate of return was

3.96%

The cumulative rate of return for the
2 years since the beginning of the
fourth Medium-term Plan in fiscal
2020 on all investment assets was

31.93%,

Chapter 1

In fiscal 2021, the total rate of returnon all investment assets was

3.98%–0.03%

while the compoundbenchmark return was

The excess rate of return was.

31.67% +0.26%.

.

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 return (monthly basis),” which was obtained by weight-averaging the benchmark
rates of return on individual assets according to the shares in the policy asset mix (domestic bonds: 25%; foreign bonds:
25%; domestic equities: 25%; foreign equities: 25%).
The fourth Medium-term Plan covering a five-year target period from fiscal 2020 to fiscal 2024 calls for securing therespective benchmark rates of return (average market rates of return) for all assets as well as for each asset.
Factor analysis of the difference from the compound benchmark return in fiscal 2021
Rate of return(Unit: %)Factor analysis of excess rate of returnAsset
allocation
factorBenchmarkfactorFund factor

Other factors(including
error)

Return of
GPIF

Benchmarkreturn

Excess rate of
return
—

Total

+5.42

+5.47

-0.06

-0.05

+0.06

-0.07

-0.00

-0.06

Domesticbonds
Foreignbonds
Domestic
equities
Foreignequities

-0.99

-1.22

+0.23

+0.01

+0.01

+0.05

-0.00

+0.07

+2.29

+1.88

+0.41

+0.00

-0.02

+0.13

+0.00

+0.11

+2.12

+1.99

+0.13

-0.04

+0.06

-0.03

+0.00

-0.01

+18.48+19.38

-0.90

-0.02

+0.01

-0.21

-0.00

-0.22

+ + +

(Note 1) 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 35.
(Note 3) The contribution to the excess rate of return by the overall alternative investments is +0.14%. For details of investment in alternative assets, refer to pages
47-57.
(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.

28

Investment Results in Fiscal 2021

1 Investment Results

Factor analysis of the difference from the compound benchmark return FY2006-FY2021
Rate of return
Return of
GPIF(Unit: %)Factor analysis of excess rate of return

Benchmark Excess rate
returnof return—Asset
allocation
factorBenchmarkfactorFund factor

Other factors(including
error)

+ + +

3.96

3.98

-0.03

-0.03

+0.02

-0.01

-0.03

FY2006

4.56

4.64

-0.08

-0.06

-0.00

-0.02

-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

FY2014from Apr.1 to Oct.30

3.97

3.50

+0.46

+0.47

-0.03

+0.02

+0.46

FY2014from 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

-0.17

+0.37

-0.03

+0.32

FY2021

5.42

5.47

-0.06

-0.05

+0.06

-0.07

-0.00

-0.06

FY2006~FY2021(Note 1) The annual rate of return of GPIF’s investment and benchmark rate of return represent the geometric mean of the rates of return in individual fiscal years(an annualize rate).
(Note 2) From fiscal 2006 to 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. Since 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 thecompound benchmark return rate. Investments in FILP bonds were terminated during fiscal 2020.

29

Investment Results in Fiscal 2021

1 Investment Results

Investment assets and portfolio allocation(Pension reserves managed by GPIF and the Pension Special Account)
Chapter 1

Inside: policy asset mix (figures in parentheses indicate deviation limits)
Outside: at the end of March 2022

Domestic bonds

Foreign equities

25.11%¥50,770.0 billion

25%

26.33%¥53,235.7 billion

25%

(±7%)

(±7%)

50% 50%(±11%)(±11%)

25%

25%

(±8%)

Domestic equities(±6%)

Foreign bonds

24.07%¥48,678.4 billion

24.49%¥49,513.7 billion

Market value(¥billion)

Allocation of
Pension Reserve (1)Domestic bonds

53,235.7

26.33%

Foreign bonds

48,678.4

24.07%

Domestic equities

49,513.7

24.49%

Foreign equities

50,770.0

25.11%

Total

202,197.7

100.00%

Allocation of
Pension Reserve (2)50.40%
49.60%
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 2021 (about ¥5.6 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: 1.07% (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+4,303.8+312.0+1,222.1-5,476.4(Note) Each figure shows the net rebalancing amount.

30

Investment Results in Fiscal 2021

1 Investment Results

Management and custodian fees

¥35.2 billion
0.02%

In fiscal 2021, total fees were.

The average fee rate on the total
investment assets for fiscal 2021 was.

Management and custodian fees decreased by ¥25.9 billion from the previous year due to lower performance-based fees assome active asset managers fell short of their excess rate of return targets, while the balance of assets under management
increased from the previous year.

(%)

70.0

0.10

Management and custodian fees

61.1

Management and custodian fees

60.0

0.08

48.7

50.0

38.3

40.0
30.0

22.2
20.0

0.09

Average fee rate against investment assets

0.02

25.3
0.02

0.07

40.0

0.06

29.5

29.1
0.03

0.03

31.9

35.2
0.04

0.04

0.03

0.02

0.05

0.02

0.02

0.02

0.03
0.02

10.0
0

0.01

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

平均残高
111.5
123.9 fees by
131.9
139.0
Management
and custodian
asset class

137.3

155.7

158.9

161.4

170.2

193.1

（兆円）

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)

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

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

35.2
3.4
18.6
6.0
5.3
1.4

(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: %)FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

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

0.02
0.01
0.04
0.01
0.01
0.09

111.5

123.9

131.9

139.0

137.3

155.7

158.9

161.4

170.2

193.1

(Note 1) Total includes in-house investment assets and index licensing fees.
(Note 2) The average balance includes in-house investment assets. For investments in FILP funds held until fiscal 2020 and managed in-house, average monthly
book values calculated by the amortized cost method are used.
(Note 3) Foreign bonds include JPY hedged foreign bonds.

31

Investment Results in Fiscal 2021

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 objective, a real investment
return (net investment yields on the pension reserve fundless the nominal wage growth rate) of 1.7% with minimalrisks. 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 to strengthen 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 the website: https://www.gpif.go.jp/gpif/portfolio.html.
(Japanese only)

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) are classified
into domestic bonds, domestic equities, foreign bonds, and foreign equities based on their risk and return profiles, and are capped to 5% of total assets.
However, if economic and market conditions prevent compliance with the 5% ceiling rule, this limit may be raised after deliberation and resolution by the
Board of Governors.
(Note 2) JPY hedged foreign bonds and yen-denominated short-term assets are classified as domestic bonds, while foreign currency-denominated short-term
assets are classified as foreign bonds.
(Note 3) In light of recent extreme economic and market volatility, GPIF may be allowed to flexibly manage investments based on an appropriate, reasonably
grounded outlook for the market environments and within 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
32

Investment Results in Fiscal 2021

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 the declining
birthrates and aging populations in Japan, funding pension
benefits solely by contribution from working generations
would place an unduly excessive burden on this group. The
pension reserve fund managed by GPIF will therefore beused 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. Target return on investments of the reserve
fund was built upon this result.

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.

33

1.3%

Scenario III 0.9%

0.8%

ScenarioIV

Scenario I

Investment Results in Fiscal 2021

2 Overview of the Policy Asset Mix[3] Details of policy asset mix formulation
Considerations in the Medium-term Objectives
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 withminimal risks.
B. The policy asset mix must be formulated from a longterm perspective and it should incorporate generally
recognized asset management expertise as well as
domestic and overseas economic trends, in light offorward-looking risk analysis.
C. The downside risks of underperforming the nominal
wage growth rate cannot exceed the one of theportfolios comprised solely of domestic bonds, andappropriate consideration should be given to the factthat the downside risks for equities may be larger than
expected. The probability that planned reserves may
become smaller than originally anticipated should beproperly accounted for and a thorough analysis ofmultiple 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 pension
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 reserve fund.
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:

Policy asset mix formulation process
Based on the results of the financial verification, the Medium-term Objectives, and recent economic conditions, GPIF decided
on the following policies when formulating the 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. 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 solelyof domestic bonds, just the same as before. GPIF also used the average short fall rate in case the return is below thenominal wage increase (conditional average shortfall rate) in order to measure the risks when optimizing the portfolio.
F. Looking at the reserve assets’ nominal accumulation trends within the financial verification, while asset sizes will peakout at different points in different scenarios, GPIF expects that the investment policy can be maintained without
reducing the reserve principals for the next 50 years or so. The peak of the size of nominal reserve assets is a criticalpoint in investment operations, as it means that investment returns alone will not be able to cover cash payouts.
Given that, GPIF analyzed reserve 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, yen-denominated short-term assets and JPY hedged foreign
bonds are all classified as domestic bonds throughout the policy asset mix formulation process, as these assets are
considered to have similar risk and return profiles to that of domestic bonds. In addition, foreign currencydenominated 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. Please note that, however, although the Chinese government bonds have been gradually included in the FTSE World Government Bond Index from
October 2021, GPIF has decided not to invest in the Chinese government bonds for the time being. Accordingly, GPIF currently uses the following index that
excludes the Chinese government bonds as its policy benchmark for foreign bonds (for details, refer to page 45).

34

Investment Results in Fiscal 2021

2 Overview of the Policy Asset Mix

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)

Expected return of each asset class and assumption for the wage growth rate
GPIF projected the expected return of domestic bonds by
the average return rate calculated within the bonds
investments simulation (which assumes future long-term
interest rates scenarios) combined with the equilibrium
return rate (Note1) deemed intrinsic to market capitalization.
To estimate expected returns on domestic equities, foreign
bonds, and foreign equities, GPIF used a building block
method (Note2) for each asset that adds a risk premium toshort-term interest rates, and combined this with theequilibrium return rate deemed intrinsic to market
capitalization. The expected return for short-term interest
rates which forms the basis for calculations is estimatedusing 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 the expected return for each asset class by adding together estimates for expected short-term interest rates and therisk 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 on the upper row indicate real returns, those in brackets on the lower row indicate nominal returns with wage growth rate.

Standard deviation and correlation of each asset class
GPIF estimated the risks and correlations of each asset class by using the annual data of the policy benchmarks for the 25
years after the bubble economy collapsed in Japan (i.e. the period from 1994 to 2018).
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 combining several different assets with different risk-return profiles is the weighted average of the expected returns ofindividual assets, while the 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 the website: https://www.gpif.go.jp/gpif/ (Japanese only).

35

Investment Results in Fiscal 2021

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 that meets the investment objective (nominal wage
growth rate plus 1.7%) with ‘the lower partial probability’ smaller than that of the reference portfolio where all areinvested in domestic bonds, and the smallest “conditional average shortfall rate.”

We continued to apply the currently used 5% interval to compose the 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 25-year
period from 1994 to 2018.

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 showsthat the amount of pension reserves with an all-domesticbond portfolio resulted in always smaller than the amount of
the planned reserve assets.
From the above-mentioned overall perspectives with the
aspects of lower partial probability and conditional average
shortfall rate, this policy asset mix is the most efficient
portfolio to meet the investment objective 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

In 50 years(As of the end of FY2068)

Current policy
asset mix

38.1

39.8

All-domestic-bondportfolio

100.0

100.0

(Reference)Median 75th percentile

2045

In 25 years(As of the end of FY2043)

Previous policy
asset mix

2060

(Unit: %)

40.0

43.0

2065 (FY End)36

Investment Results in Fiscal 2021

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 of the global financial crisis in 2008 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 global financial crisis would occur once every 70 years, while that similar tothe 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, theFederation 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: %)37

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 2021

2 Overview of the Policy Asset Mix[4] Policy asset mix verification
Verification policy stipulated in the Medium-term Planof significant changes in the investment environment
presumed at the time the Plan was formulated), a review
will be considered and revisions promptly implemented asnecessary.

Chapter 1

Verification of the policy asset mix at GPIF will be conductedin a timely and appropriate manner during the period of the
fourth Medium-Term Plan and, when deemed necessary
by the Board of Governors (e.g., when there is possibility

Verification system
To verify the policy asset mix at GPIF in a timely andappropriate manner, a PT for Policy Asset Mix Verification,etc., has been established under the Board of Governors tocarry out practical tasks pertaining to policy asset mix

verification. The PT comprises members of the Board ofGovernors who have expertise in the fields of finance andeconomics.

Verification method

Verification 1

Verification is performed in two stages: Verification 1 and Verification 2, as illustrated below.

PT

Carry out regular monitoring of various indicators, including· Policy benchmarks· Short-term interest rates· Market capitalization· Risk (standard deviation) and correlation coefficient· Equilibrium rate of return, etc.
ReportVerification

Board ofGovernors

Determine the need to check on various figures

PT

Check on various figures, i.e.,· Update expected returns· Update risk (standard deviation) and correlation coefficient· Confirm the relationship between real expected returns and theconditional average deficiency rate
· Estimate future reserve amounts, etc.
ReportBoard ofGovernors

Determine the need for a review (resolution)

Considerationof review

NecessaryPT

Not necessary

Consider review
ReportBoard ofGovernors

Not necessary

Determine whether to conduct
review (resolution)

Verification

Verification 2

Necessary(Return once more to
Verification 1 monitoring)*The PT in the figure above is the “PT for Policy Asset Mix Verification, etc.”38

Investment Results in Fiscal 2021

2 Overview of the Policy Asset Mix

a. Verification 1
GPIF’s policy asset mix is formulated from a long-term
perspective and is based on the 25-year of data
including (1) policy benchmark return, (2)short-term
interest rates, (3)the most recent market capitalization
at the time the policy asset mix is formulated, and (4)the risk (standard deviation), correlation coefficient,and the equilibrium rate of return, all of which arecalculated from these (1) (2) (3). The PT regularly
monitors these various indicators that were used as
the basis for formulating this policy asset mix.
If changes are observed in these indicators in thecourse of periodic monitoring and it appears theinvestment environment may have changed
significantly from that presumed when the portfolio
was formulated, the PT will report such changes tothe Board of Governors.

b. Verification 2
If the PT reports that changes in various indicators areobserved and that the investment environment may
have changed significantly from that presumed when
the portfolio was formulated as a result of regularmonitoring (Verification 1), the Board of Governors
shall determine whether to conduct a Verification 2 inwhich various figures – updating expected return, therisk (standard deviation) and correlation coefficient,confirming the relationship between real expected
return and the conditional average deficiency rate, andestimating future reserves, etc. – are checked.
If it is determined that a Verification 2 should be
conducted (updating expected returns, etc.), the PT
will carry out the Verification 2 tasks and report theresults to the Board of Governors.
The Board of Governors will determine whether toconsider a review of the policy asset mix based on thereport by the PT.
Based on the Board of Governors’ determination, if
determined to be necessary, the PT will consider
whether to review the policy asset mix, and the PT
reports the outcome of its consideration to the Boardof Governors.
The Board of Governors will promptly revise the policy
asset mix as necessary based on the results of thereview consideration by the PT.
Even if the regular monitoring (Verification 1) does notreveal any significant changes in the investment
environment from that presumed when the policy
asset mix was formulated, the PT will report the status
of monitoring to the Board of Governors at least oncea year. Based on the report by the PT, the Board ofGovernors will then determine whether it is necessary
to carry out Verification 2 (checking various figures
such as updating expected returns).

Outcome of Verification in fiscal 2021
Verification 1 conducted in fiscal 2021 concluded that theinvestment environment had not necessarily changed
significantly from that presumed when the policy asset mix
was formulated, so it was determined that neither

39

Verification 2 (checking various figures such as updating
expected returns), nor a review of the policy asset mix
were necessary.

Investment Results in Fiscal 2021

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 by safe and efficient managementfrom a long-term perspective solely for the beneficiaries.
The Medium-term Objectives approved by the Minister of
Health, Labour and Welfare (MHLW) stipulate that GPIF is
required to achieve a long-term real return (net investment
yield on the pension reserve fund less the nominal wage
growth rate) of 1.7% with minimal risks.
Amid heightened uncertainties about the recent market
and economic environments, the risk GPIF focuses onrefers not to “a risk caused by short-term fluctuations inmarket 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 the entire portfolio, individual
asset classes, and individual asset managers, respectively.
At the same time, we ensures the achievements of thebenchmark rates of return for the entire portfolio as well as
for each asset class by monitoring various indicators 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 be reported 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 the level of the entire portfolio, individual asset classes, and individual asset
managers, respectively, while ensuring the achievement of the benchmark rate of returns for the entire portfolio as
well as for each asset class.
(4) GPIF carries out flexible investment based on a proper outlook for the market environments, within a deviation limit forthe policy asset mix, upon thorough analysis on the current trends marked by the fast-changing economic 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 the 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 caused by factors such as deterioration in the financial position of issuers of the portfolio assets,
institutions entrusted with asset management 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
40

Investment Results in Fiscal 2021

3 Basic Policy of Portfolio Risk Management[2] Risk management based on a policy asset mix
As mentioned above, GPIF believes that the most important
aspect of portfolio risk managements is a proper managementof asset allocation based on a policy asset mix. Since themarkets constantly change, it is essential to establish aframework that enables GPIF to manage investments flexibly
within a reasonable range, while actual investments shall be
carried out based on the policy asset mix. Accordingly, GPIF
flexibly manages the policy asset mix within deviation limits
defined for each of four types of assets—domestic bonds,
foreign bonds, domestic equities, and foreign equities—as well
as overall bonds and overall equities. At the same time, GPIF

35.0
35.0
30.0
30.0
25.0
25.0
20.0
20.0
15.0
15.0

35.0
35.0

Upper deviation limit

Actual allocation

25.00%
25.00%

Policy asset mix
Policy asset mix
Lower deviation limit

May
May

Jun
Jun

Jul
Jul

Aug
Aug

Sep
Sep

Oct
Oct

Policy asset mix

Actual allocation

Policy asset mix

Actual allocation

Jan
Jan

Feb
Feb

Mar
Mar

25.00%
25.00%
24.07%
24.07%

Lower deviation limit

Apr
Apr

May
May

Jun
Jun

Aug
Aug

Sep
Sep

Oct
Oct

Nov
Nov

Dec
Dec

Jan
Jan

Feb
Feb

Mar
Mar

Bonds

(%)
70.0

Lower deviation limit
Lower deviation limit

Apr
Apr

May
May

Jun
Jun

Jul
Jul

30.0
30.0

Sep
Sep

Oct
Oct

Nov
Nov

Dec
Dec

Jan
Jan

Feb
Feb

Mar
Mar

Foreign equities
Foreign equities
Upper deviation limit
Upper deviation limit

25.11%
25.11%
25.00%
25.00%

Actual allocation
Actual allocation

25.0
25.0
20.0
20.0

Aug
Aug

Policy asset mix
Policy asset mix
Lower deviation limit
Lower deviation limit

10.0
Mar
10.0
Mar

Apr
Apr

May
May

Jun
Jun

Jul
Jul

Aug
Aug

Sep
Sep

Oct
Oct

Nov
Nov

Dec
Dec

Jan
Jan

Feb
Feb

Mar
Mar

Equities

Upper deviation limit

60.0

55.0

50.40%

Actual allocation

50.0

50.00%

Policy asset mix

45.0
40.0

30.0

Actual allocation

Policy asset mix

10.0
Mar
10.0
Mar

65.0

Upper deviation limit

25.00%
25.00%
24.49%
24.49%

Actual allocation

Policy asset mix

(%)
70.0

60.0

35.0

Upper deviation limit

20.0
20.0

15.0
15.0

Jul
Jul

Upper deviation limit

(%)
40.0
(%)
40.0

Lower deviation limit

Mar
Mar

25.0
25.0

35.0
35.0

25.0
25.0

65.0

Dec
Dec

Upper deviation limit
Upper deviation limit

10.0
10.0

Nov
Nov

Foreign bonds
Foreign bonds

30.0
30.0

15.0
15.0

30.0
30.0

15.0
15.0

Lower deviation limit

(%)
40.0
(%)
40.0

20.0
20.0

26.33%
26.33%

Actual allocation

Apr
Apr

Domestic equities
Domestic equities

(%)
40.0
(%)
40.0

Upper deviation limit

10.0
Mar
10.0
Mar

35.0
35.0

Management of deviation limits

Domestic bonds
Domestic bonds

(%)
40.0
(%)
40.0

establishes alarm points within deviation limits in order tosmoothly and appropriately manage its asset allocations,and sets a policy to clarify a responsive process in theevent of exceeding the deviation limits as well as alarm
points. In fiscal 2021, there were no assets that exceeded
the deviation limits or alarm points. While the upper limit foralternative assets is set as 5% of the total assets, we havealso established alarm points for these assets and expressly
state a responsive process in the event of the exceeding ofthese two limits. GPIF managed investment of alternative
assets within the upper limit and the alarm point in fiscal 2021.

55.0

Policy asset mix

50.00%

Actual allocation

50.0

49.60%

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) Since fiscal 2021, the notional amount of stock index futures and other factors are taken into account in the calculation.
(Note 3) The deviation limits under the fourth Medium-term Plan are ±7% for domestic bonds, ±6% for foreign bonds, ±8% for domestic equities, ±7% for foreign
equities. ±11% for overall bonds, and ±11% for overall equities.

41

Investment Results in Fiscal 2021

VaR ratio is obtained by dividing VaR (Note2) for the actual
asset mix by VaR for the policy asset mix, an indicator formonitoring as to what extent the risk amount of the actual
portfolio deviates from that of the policy asset mix.
In fiscal 2021, GPIF ensured that the actual amount ofrisk in the portfolio did not deviate from the amount of riskthat would have been taken had it been investing in thepolicy asset mix, regarding the amount of stock price risk
and foreign exchange risk, which are the major market
risks, particularly in the face of rising market volatility in thesecond half of the fiscal year. In addition, the VaR ratio
ranged between 1.00 and 1.03, as GPIF kept the amountof spread risk and alternative risk, which are minute in thepolicy asset mix, relatively low.

Chapter 1

In addition to risk management with the above mentioned
deviation limits and upper limit established for alternative
investment, we continue to monitor estimated tracking
errors (Note1) of the overall assets and VaR ratio as indicatorsfrom a multitiered risk management perspective.
In fiscal 2021, the estimated tracking errors of theoverall assets remained low at 18-35 basis points (1bp
refers to 0.01%) throughout the year, as a result of GPIF
having utilized stock index futures and implemented carefully
tailored measures to ensure that overall assets did notdeviate from the policy asset mix’s compound benchmark
return, in the face of rising market volatility especially in thesecond half of the fiscal year.

3 Basic Policy of Portfolio Risk Management(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

(Note) Since fiscal 2021, the notional amount of stock index futures and other factors are taken into account in the calculation.

VaR ratio and VaRVaR ratio(%) VaR

VaR ratio

19.0

Policy asset mix:VaR

17.0

Actual asset mix:VaR

VaR-ratio

1.20
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 1) VaR is calculated using the delta method based on the 1σ confidence level over a one-year holding period and two-year observation period.
(Note 2) Since fiscal 2021, the notional amount of stock index futures and other factors are taken into account in the calculation.

(%)

VaR (Two-year observation period)

25

(%)

the delta method:1

the delta method:95%

the delta method:1

20

20

15

15

10

10

5

5

0

VaR (Five-year observation period)25

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 1) VaR is calculated using the delta method based on the 1σ and 95% confidence level over a one-year holding period and two-year and five-year
observation period (ratios are calculated on an actual asset mix basis for both periods).
(Note 2) Since fiscal 2021, the notional amount of stock index futures and other factors are taken into account in the calculation.

42

Investment Results in Fiscal 2021

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

target asset-specific expertise, risk management 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, in addition to those

Considering these profiles, the inclusion of alternative
assets in GPIF’s portfolio is expected to generate
diversification effects and improve the investment efficiency.
Accordingly, GPIF has increased investments incommon to traditional assets.
Enabling more elaborate risk management, GPIF willcontinue the efforts to ensure comprehensive, elaboraterisk management.

alternative assets since fiscal 2017. To fulfill the need for(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 forcrisis scenario (2008-2009) in which the market fell sharply,

measuring the impact on returns and capital in the event of

the Dot-com bubble burst scenario (2001) in which thea significant market movement, and determining a methodmarket was slow to recover, or a market decline scenario

to implement a proper measure accordingly.

due to the COVID-19 pandemic (the first wave)—there were

It is essential that pension fund shall be managed safely

temporary impacts on the real investment yields obtainedand efficiently from a long-term perspective, and GPIF

since the start of market investments, but the markets

analyzes the impacts that might arise over the medium-to-

recovered thereafter and the expected level of investment

long term. For a number of scenarios—the Global financial

yield was secured.

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 first wave of the COVID-19 pandemic)

90
80
70
60

Stress tests
GPIF adopted the current
policy asset mix

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 2028 (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 2021 represents the result as of Dec. 31, 2021.
(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, 2021) as 100.

43

Investment Results in Fiscal 2021

Risk reduction through long-term investment[Short-term average return(in one-year periods)](%)[Long-term average return(in ten-year periods,
annualized)]
(%)

40

40

31.3
30

Maximum

30

20

20

10

10

5.9

Median

0

−10

−10

−21.1

Minimum−30

7.8

Maximum
Median

5.6

0

−20

Chapter 1

In analyzing portfolio returns based on historical data, GPIF
analyzed the distribution of returns by the current policy
asset mix using the market’s actual performance over the
past 34 years. We found that, in the short term, there was a
maximum single-year gain of over +30% and a maximum
single-year loss of over -20%, suggesting the possibility ofa temporary loss equivalent to the record-high earnings offiscal 2020. However, returns are stable over the long term,
and not a single ten-year period over the past 34 years has
been negative. The policy asset mix was created to ensure
1.7% real return over the long term. We should not be
overly preoccupied with market fluctuations. Nevertheless,
GPIF envisions a variety of stresses that could occur in thenear future and gives due consideration to such short-termrisks in order to manage investment risks over thelong term.

3 Basic Policy of Portfolio Risk Management

Minimum

1.3

−20

−30

(Note 1) Average returns are calculated on the presumption of a rebalancing
to the current policy asset mix at the end of each fiscal year.
(Note 2) The analyzed period spans 34 years from April 1985 to March 2019.

ESG investment expected to reduce risks from a long-term perspective
Given the fact that the law requires pension reserve fundshould to be managed safely and efficiently from thelong-term perspective, risk management based on thelong-term perspective is further important for GPIF.
GPIF’s investment approach takes ESG factors into
account in order to improve long-term returns from thewhole assets by reducing negative externalities such asenvironmental and social issues. Because ESG-related risks,
as symbolized by climate change risks, etc., are expected
to be more likely materialized as investment horizon
becomes longer, we recognize that it is meaningful for GPIF
to reduce these long-term risks through ESG investments.
In fiscal 2021 like before, GPIF continued to promote
investment with consideration to ESG factors.

Securing the amount of planned reserves
Another important issue is how to control risks that theamount of pension reserves falls below the amount ofplanned reserves in the long run. The current policy asset
mix was formulated in fiscal 2019 through a process of
simulation with a stochastic calculation using random

numbers to confirm the risks of an inability to attain theamount of planned reserves on the financial verification.
Thus, we managed to select the most efficient portfolio thatseeks to minimize downside risks, while meetinginvestment objectives.

(Note) For details of the current policy asset mix, refer to pages 32-39.

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)

44

Investment Results in Fiscal 2021

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+0.04%; fund factors (Note3): +0.19%; other(Note1)was +0.23%. The

breakdown of the excess rate of return on domestic bondfactors (Note4): +0.00%.
(Unit: %)Time-weighted rateof returnBenchmark

-0.99

-1.22

Excess rate of
return—Benchmark factors

Fund factors

Other factors

+0.23

+0.04

+0.19

+0.00

(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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.
(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-0.09%; fund factors (Note3): +0.50%; other(Note1)was +0.41%. The

breakdown of the excess rate of return on foreign bondfactors (Note4): -0.00%.
(Unit: %)Time-weighted rateof returnBenchmark

2.29

1.88

Excess rate of
return—Benchmark factors

Fund factors

Other factors

+0.41

-0.09

+0.50

-0.00

(Note 1) The benchmark of foreign bonds is FTSE World Government Bond Index (not incl. JPY, CNY, 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, CNY, no hedge/JPY basis)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.
(Note 4) Other factors refer to calculation errors and such.

Modification in Benchmark

45

The FTSE World Government Bond Index, the GPIF’s

investment, and (3) futures trading is not permitted tobenchmark for foreign bonds, is planned to graduallyforeign investors.

include the Chinese government bonds over the period ofConsequently, the current benchmark for foreign bonds

36 months from October 2021. However, it is decided thatis customized to the FTSE World Government Bond Index

GPIF would not invest in the Chinese government bonds for(not incl. JPY, CNY, no hedge/JPY basis). Please note that,the time being, due to the various factors including (1) the

however, the benchmark for foreign bonds before October

Chinese government bonds cannot be settled through an

2021 does not include the Chinese government bonds, sointernational settlement system, (2) the bond’s market

the characteristics of GPIF’s foreign bond investments has

liquidity is limited compared to the scale of GPIF’s

not changed after October 2021 compared to before.

Investment Results in Fiscal 2021

4 Status of Investment in Each Asset Class[3] Domestic equities

Concerning domestic equity investment, the excess rate ofinvestment by factor is as follows: benchmark factors (Note2):

return over the benchmark+0.24%; fund factors (Note3): -0.12%; other(Note1)was +0.13%. The

breakdown of the excess rate of return on domestic equity

Chapter 1

Excess rate of return

factors (Note4): +0.01%.
(Unit: %)Time-weighted rateof returnBenchmark

2.12

1.99

Excess rate of
return—Benchmark factors

Fund factors

Other factors

+0.13

+0.24

-0.12

+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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.
(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+0.06%; fund factors (Note3): -0.96%; other(Note1)was -0.90%. The

breakdown of the excess rate of return on foreign equity

factors (Note4): +0.00%.
(Unit: %)Time-weighted rateof returnBenchmark

18.48

19.38

Excess rate of
return—Benchmark factors

Fund factors

Other factors

-0.90

+0.06

-0.96

+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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.
(Note 4) Other factors refer to calculation errors and such.

46

Investment Results in Fiscal 2021

5

5 Investment in Alternative Assets

Investment in Alternative Assets[1] Overview
Alternative assets are the generic term for investment

to fiscal 2024) stipulates alternative assets to beassets that are “alternative” to traditional assets including

categorized into domestic bonds, foreign bonds, domestic

listed equities and bonds. Among a variety of alternative

equities, and foreign equities in accordance with risk-returnassets, GPIF invests in infrastructure, private equity, andprofiles, and to be invested up to a cap of 5% of thereal estate. The fourth Medium-term Plan (from fiscal 2020

total portfolio.

Investment purpose
Pension funds in other countries have been promoting

Alternative assets have different risk-return profiles fromtraditional assets such as listed equities and bonds.

diversification by investing in alternative assets for theConsidering these profiles, the inclusion of alternative

aforementioned characteristics and effects. Prior to starting

assets in GPIF’s portfolio is expected to improve theinvestment in alternative assets, GPIF carried out careful

investment efficiency and to contribute to the stability of

examinations in commissioned research projects. In

overall pension finance. Also, alternative assets have lower

particular, the research conducted in fiscal 2012 reported

liquidity while they produce higher investment return thanthat the inclusion of alternative investments is expected toso do traditional assets. As a long-term investor managing

realize the investment premium for illiquidity and improvesignificant liquid assets, GPIF now strategically holds

the efficiency of investment through diversification.

alternative assets with lower liquidity in the portfolio andaims to earn excess return with improving the investment
efficiency of its portfolio.
Alternative Assets
Infrastructure

Private equity

Real estate

Investment history
Based on the results of the above-mentioned

Market Investment Department), employing experts,

commissioned research projects, GPIF has been investingexamining investment strategy by external advisors (sincein alternative assets through a co-investment platform withfiscal 2015), and developing a risk management framework.

institutional investors since fiscal 2013 (in infrastructure

Considering the individuality of the investment performancesince fiscal 2013 and in private equity since fiscal 2015).

and the low liquidity of alternative assets, risk management

In fiscal 2017, GPIF started calling for applications fromat the time of investment evaluation and after execution ofasset managers for alternative assets through the Assetinvestment is an important issue. GPIF will strive continuallyManager Registration System and went through theto enhance the framework for investing in alternative assets,screening process for external asset managers (fund ofincluding risk management.

funds managers who select multi-managers andgatekeepers who evaluate fund of funds managers’* A multi-manager strategy is an investment approach to diversify theinvestment capabilities) for executing customized

investment into multiple funds. A multi-manager strategy also called as amultimanager strategies* for GPIF.

fund-of-funds, an investment vehicle where a fund invests in a portfolio

GPIF has worked continuously to develop theorganization for investing in alternative assets by various
measures, such as establishing a specialized unit (Private

47

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 2021

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)

Discretionary
investment mandate
for Japanese private
equity(Jan. 2022)

Chapter 1

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

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021
Call for applications of asset managers (Apr. 2017)
Discretionary investment mandate for real estate(Japan-Core) (Dec. 2017)
Discretionary investment mandates for infrastructure(Global-Core) (Jan. 2018)

Discretionary 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 2021(¥billion)

2,400

2,158.6

2,200

Infrastructure (Discretionary investment)

2,000

Infrastructure (In-house)

1,800

Real estate (Discretionary investment)

1,600

892.4

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

1,341.9

1,400
1,200
1,000
800
600

0

571.1

390.4

165.0

773.1

432.7

400
200

186.4

944.5

154.7
544.7
148.8
50.0
144.8
270.1
380.8
100.6
83.3
146.7
81.4 1.9 96.4 4.2 8.1 8.2 124.914.3
18.5 36.7 24.4 36.5
2016/32017/3
2018/3
2019/32020/32021/32022/3

213.0

0.2

5.5

2014/3

2015/3(Note) Please refer to the website (https://www.gpif.go.jp/investment/alternative/) for specific examples of investments in alternative assets (Japanese only).

The amount of alternative assets under management ofvalue of GPIF’s investment in alternative assets as of the

GPIF has been steadily accumulated in recent years, while

end of March 2022 is ¥2,158.6 billion (1.07% of the total

it has been developing investment capabilities. The total

value of the pension reserve fund).

Activities in fiscal 2021
A. Call for application, selection of Gatekeepers and Fund of Funds managers
Following on from last year, GPIF called for applications

undertaken investments in new funds-of-funds with twofrom external asset managers in alternative assets byexisting external asset managers in the infrastructure.

utilizing the Asset Manager Registration System and went

To select asset managers, a GPIF team conducts

through the screening process to select external asset

several rounds of screening, including application

managers that execute customized multi-manager

documents check, interviews, and on-site visits withstrategies for GPIF.

external advisors to carefully examine the capabilities,

In addition to starting investments in funds-of-funds

investment strategies, investment track record, and risk

with newly selected external asset managers for Japan-

management system, etc. of the prospective managers.

Focused Strategy in the private equity, GPIF has

48

Investment Results in Fiscal 2021

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(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

investment management agreement. Appointed asset

portfolio time diversification. Therefore, it takes a long time

managers set up a fund-of-funds solely for GPIF and invest

to invest in alternative assets.

in funds in accordance with the pre-agreed guidelines thatGPIF receives a periodic report on the status of portfolio

define investment objectives, strategies, and certain

assets and monitors the performance and risks. In addition,

restrictions, etc.

GPIF conducts annual comprehensive evaluation of external

Each fund will then invest in individual alternative assets.

asset managers, and properly manages investment by

However, it takes a certain amount of time from identifying

confirming that their fund management team composition

investment opportunities to the completion of various

has not changed and by monitoring the progress of theirinvestigations (due diligence). It is also important to diversify

investment plans.

B. Development in preparation for investment in limited partnerships (LPs)
By revising Ordinance for Enforcement of the GPIF Act inadopted by institutional investors including pension funds in

September 2017, interests in limited partnerships (LPs) as

other countries to invest in alternative assets.

limited partners were added to the securities in which GPIF

Following the revision of the Ordinance, GPIF started

may invest directly. The expected benefits of directly investing

preparation for such investments including developing a risk

in LPs include faster access to information on investees,

management framework, etc. from fiscal 2017. In fiscal

improvement of net returns and enhancing risk management

2021, it bolstered its risk management and legal functions.

through simplified investment scheme with fewer

It also examines the means and strategies required for GPIF

intermediaries involved between investors and investees.

to fulfill its stewardship responsibilities in future investment

Therefore, such investments in LPs have been generally

in LPs.

C. Investment status of alternative assets
Investment status as of the end of March 2022
Commitment amount (¥billion)
Total value (¥billion)
Internal rate of return (IRR) up until
fiscal 2021 (in JPY terms)
Domestic assets (in JPY terms)
Foreign assets (in USD terms) (Note2)(in JPY terms) (Note3)(Note1)49

Total of alternative assets
4,036.8
2,158.6

Infrastructure
1,888.0
1,078.8

Real estate
1,221.0
773.1

Private equity
927.8
306.6

10.89%

8.93%

12.99%

21.38%

6.54%
7.30%
11.55%

3.24%
5.85%
9.17%

7.32%
10.30%
16.17%–
11.85%
21.38%(Note 1) Each field is based on the sum of the funds-of-funds and investment trusts.
(Note 2) 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 3) The rates are based on the sum of the assets invested in domestic assets (currency: JPY).
(Note 4) The rates are based on the sum of the assets invested in foreign assets (currency: USD).
(Note 5) The amount of foreign currency-denominated assets is calculated by converting the amount into JPY.

Investment Results in Fiscal 2021

5 Investment in Alternative Assets(Column) Analysis on changes in market value in fiscal 2021
Chapter 1

During the year beginning from the end of March 2021, the market value of GPIF’s alternative assets increased by¥816.6 billion. The increase can be mainly divided into five factors:
Capital contribution to new investments (+¥554.1 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 2021, investments have been executed in all three asset categories of alternative assets.
Distributions received (-¥81.9 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 2021, GPIF received distributions, mainly
dividends from its investees in infrastructure and real estate.
Fees and expenses (-¥9.1 billion):
The amount includes fees and expenses for acquisition and disposition incurred by fund-of-funds and investment
trusts (equivalent to 0.55% of the average of outstanding amount of alternative assets in fiscal 2021).
(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 (+¥198.5 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 2021, signs of recovery in market values were seen in sectors affected by the COVID-19
pandemic, and market valuations in other sectors remained strong, leading to an increase in the market value of
portfolio companies.
Fluctuations in currency exchange (USD) (+¥154.8 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 2021.

Analysis on changes in the market value of alternative investments (from April 2021 to March 2022)
CapitalCommitment

CapitalCommitment(¥billion)

4,036.8

2,981.02,400.0
2,200.0
2,000.01,800.01,600.0
1,400.0 1,341.9
1,200.0
1,000.0
800.0
600.0

Total value(End of March 2021)

198.5

554.1
-81.9

Capital contribution
to new investments

Dividends received
by way of withdrawing

154.8

2,158.6-9.1

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2022)
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 of 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).

50

Investment Results in Fiscal 2021

5 Investment in Alternative Assets[2] Infrastructure
Overview
We invest in infrastructure such as power generation plants, electricity transmission grids, renewable energy, railways, andtelecommunication infrastructure. Due to the stable revenues, which are expected to be derived from such infrastructure overthe long term, infrastructure investment has become one of the important investment strategies for pension funds globally.
Currently, GPIF mainly focuses on investing in core infrastructure, which are assets essential for social and economic
activities, under a well-established regulatory environment
and is expected to generate stable revenues based on longterm contracts. Infrastructure assets will operate for a longtime, generally more than 10 years, and invested capital shallbe recovered as dividends funded by stable revenue as wellas proceeds from sale of the assets to other investors.

GPIF’s investment
A. Investment approach
GPIF aims to earn stable returns from a diversified portfolio mainly as income gain through timely and efficient investment, in
consideration of various market conditions.
B. Investment objectives and schemes
GPIF mainly invests in equity stakes of operational infrastructure assets or 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 started investing in a unit trust that targets to invest in operational core infrastructure assets in developed
countries in February 2014.
(ii) Discretionary investment
Throughout fiscal 2021, the following managers continued their investment activities and are constructing 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.

51

Investment Results in Fiscal 2021

5 Investment in Alternative Assets

C. Investment status
COVID-19 pandemic. Robust market values in otherend of March 2022 was ¥1,078.8 billion, which increased

sectors as well as currency fluctuations have resulted in anby ¥342.6 billion from the end of March 2021. Signs ofoverall increase in the market capitalization forrecovery in market values were seen in airports and otherinfrastructure assets.

Chapter 1

The total value of GPIF’s infrastructure investment as of thetransportation sector assets that have been affected by the
Analysis on changes in the market value of infrastructure (From April 2021 to March 2022)
CapitalCommitment

1,888.0(¥billion)

1,200.0
1,100.0
1,000.0
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0

CapitalCommitment

1,138.9

-60.0

736.2

Total value(End of March 2021)

Capital contribution
to new investments

86.6

87.6

232.8

Dividends received
by way of withdrawing

1,078.8-4.5

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2022)
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 an estimate.

The breakdown of portfolio by country shows the U.S. withof return (IRR) from foreign infrastructure investment stood

the largest share at 26%, followed by the UK at 22% andat 5.85% in USD terms, and IRR from domestic

Australia at 9%. As for the breakdown by sector, the largest

infrastructure investment stood at 3.24% in JPY terms

share went to renewable energy at 21%, followed bysince its inception in February 2014. The total dividend

telecommunications at 13% and utility (electricity/gas) at(excluding repayment of principal) received from the unit

11%. GPIF expects stable revenue to be generated mainly

trust and fund of funds during fiscal 2021 was ¥34.9 billion.

from its diversified core infrastructure portfolio. Internal rate

Value by country
Italy 3%

Other Transportation

4%

OthersFrance 3%7%

Belgium 3%

5%

Renewable
EnergyWater Supply
and Sewerage

21%

6%

Telecommunications

13%

Toll Roads

Japan

7%

5%

Canada

6%

8%

5%

26%

SwedenOthersEnergyU.S.

Germany 4%

Spain

7%

Australia

Value by sector

Port

UK

22%

Gas/
Oil Pipeline8%8%Airport9%

Utility(Electricity/Gas)

11%

9%

52

Investment Results in Fiscal 2021

5 Investment in Alternative Assets[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.
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 2021, GPIF appointed additional external asset managers for Japan-Focused Strategy to capture domestic
investment opportunities not adequately covered by the asset managers for Global-Diversified Strategy in which GPIF
began investing in fiscal 2020. Through the following external asset managers’ fund-of-funds, GPIF invests in diversified PE
funds, mainly in developed countries.
Investment style

Start ofinvestment

Gatekeeper: Neuberger Berman East Asia Limited
Fund of Funds Manager: NB Alternatives Advisers LLC

Global-Diversified
Strategy

April 2020

Gatekeeper: Mitsubishi UFJ Trust and Banking Corporation
Fund of Funds Manager: Hamilton Lane Advisors, L.L.C.

Global-Diversified
Strategy

January 2021

Gatekeeper and Fund of Funds Manager: Mitsubishi UFJ
Trust and Banking Corporation
Investment Advisor to FoF Manager: Alternative Investment
Capital Limited

Japan-Focused
Strategy

January 2022

Asset manager name53

Investment Results in Fiscal 2021

5 Investment in Alternative Assets

C. Investment status
new investments made mainly through discretionary asset

end of March 2022 was ¥306.6 billion. Those increased bymanagers as well as market value appreciation of portfolio¥245.6 billion from the end of March 2021. The market

companies and foreign exchange fluctuations.

value of the entire private equity portfolio increased due toAnalysis on changes in the market value of private equity (From April 2021 to March 2022)

Chapter 1

The total value of GPIF’s private equity investment as of theCapitalCommitment

927.8

CapitalCommitment(¥billion)

708.1

350.0
300.0
250.0

-5.4

200.0

24.5

27.5

199.4

306.6

-0.5

150.0
100.0
50.0

61.0

0.0

Total value(End of March 2021)

Capital contribution
to new investments

Dividends received
by way of withdrawing

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2022)
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.

The breakdown of portfolio by region shows North America

industries, including consumer discretionary and industrials.

with the largest share at 77%, followed by emerging

The internal rate of return (IRR) from the entire PE

countries mainly in Asia. By sector, information technology

investment stood at 11.85% in USD terms (as of the end of

accounted for the largest share (37%), while other

March 2022) since its inception of in-house investment ininvestments were diversified across a wide range ofinvestment trusts in June 2015.

Value by region
Latin America 1%

Japan 0.3%

Value by sector
Others 1%

Communication Services 3%

Middle East / Africa 2%

Financials 4%
Consumer Staples

7%

Europe9%

Materials

Asia Pacific

8%

11%

Information
Technology

37%

Health Care

9%
North America

77%

Industrials

14%

Consumer
Discretionary

17%(Note) The data is broken down by region, as PE investments span a wide range of countries.

54

Investment Results in Fiscal 2021

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 is necessary

which is expected to generate stable rental income fromto engage asset managers and/or property managers, etc.

tenants, and this strategy has been adopted as the major

to sustain asset value over the long term. GPIF promotes

investment strategy by pension funds in other countries asinvestments in a careful and strategic manner, taking into

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

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

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
With an investment manager for domestic market appointed in 2017 and investment managers for foreign markets
appointed in 2018 and after, GPIF has been building a global and diversified investment portfolio focused on its core-styleinvestment strategy throughout FY 2021.
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

55

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

September 2018

February 2021

Investment Results in Fiscal 2021

5 Investment in Alternative Assets

C. Investment status
market capitalization of real estate assets increased due toMarch 2022 was ¥773.1 billion. It increased by 228.4 billion

market value gains from generally stable performance andfrom the end of March 2021. Some sectors affected by thecurrency fluctuations.

COVID-19 pandemic showed signs of recovery, and overall
Analysis on changes in the market value of real estate (From April 2021 to March 2022)
CapitalCommitment

CapitalCommitment(¥billion)

Chapter 1

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

1,221.0

1,134.0

900.0
800.0
700.0
600.0

544.7

-16.5

773.1

43.6

83.4

121.8
-4.1

500.0
400.0
300.0
200.0

Total value(End of March 2021)

Capital contribution
to new investments

Dividends received
by way of withdrawing

Fees andexpenses (Note)

Changes inmarket valueof investees

Fluctuations
Total value
in currency (End of March 2022)
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.

The breakdown of portfolio by country shows the U.S. withdomestic real estate investment since December 2017

the largest share at 39%. followed by Japan (29%), UK

inception is 7.32% (yen-denominated), while that of foreign(10%), and Australia (6%). As for the breakdown of thereal estate investment since September 2018 inception is

sector, logistics sector comprised the largest share at 42%

10.30% (USD-denominated). Dividend received from theof the total portfolio, followed by office at 32%, residential

fund of funds in fiscal 2021 (excluding repayment ofproperties at 19%, and retail at 6%. The investment isprincipal) was ¥13.7 billion in total. We will continue

diversified and focused on core-style real estate funds ininvesting in real estate funds, while paying attention to theadvanced countries. Internal Rate of Return (IRR) of

market circumstances, advised by external consultants.

Value by country

Value by sector
Others 1%

Germany 3%

Retail 6%

Others8%

France 5%
Australia

6%

U.S.

Residential
Properties

Logistics

39%

19%

42%

UK

10%

Japan

29%

Office32%

56

Investment Results in Fiscal 2021

5 Investment in Alternative Assets[5] Portfolio risk management of alternative assets
In fiscal 2021, GPIF further developed and strengthened its

external asset managers, including conventional qualitative

management system and pursued better risk management

evaluations, by starting to conduct quantitative analyses tofor alternative assets. It has enhanced dialogue andcompare the performance of GPIF’s funds of funds

information sharing with external asset managers so thatmanaged by external asset managers with available market

GPIF could understand more about portfolio companies fordata.

which there are concerns about worsening performance, it

For highly individualized alternative investments, it is

has also sought to gain a more in-depth understanding of

extremely important to carefully examine and confirm thetheir valuations, the factors causing their market valuations

provisions of domestic and foreign laws, regulations, andto fluctuate, including the background external environment,

contracts relevant to these investments, and the Legaland measures to improve these factors. In addition to

Department established in fiscal 2020 is conducting legal

enhancing its existing monitoring system, GPIF ischecks and taking other necessary steps.

endeavoring to improve the accuracy of its evaluation of<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

Market risk

portfolio

Liquidity risk
Credit risk

risk management

Country risk, etc.
For details, refer to page 40 “3 Basic Policy ofPortfolio Risk Management”

Checks&Entire portfolio risks

Collaboration

Balances
Typical items specificto alternative assets

Alternative
investment
specific risks
Private Market

Private Market

Investment

Investment

Department

Department(investment)(risk management)· Continuous evaluation of asset
managers pre/post selection· Continuous monitoring of
portfolio construction status

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 for long-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 pages 40-44.

57Investment Results in Fiscal 2021

6

6 Stewardship Responsibilities

Stewardship Responsibilities

In the Investment Principles and the Code of Conduct,

portfolio) and a “cross-generational investor” (responsible

GPIF stipulates that we promote activities to fulfill ourfor supporting pension finance with an investment horizon

stewardship responsibilities(hereinafter “stewardshipof as long as 100 years) to bridge the intergenerational gap

activities”) with the objectives of appropriately fulfilling ourof contribution, it is essential for GPIF to minimize negative

responsibilities to pension beneficiaries as their fiduciary,externalities of corporate activities (environmental and social

and increasing investment returns over the long term. The

issues, etc.) and to promote steady and sustainable growth

Investment Principles were partially amended in Octoberof the overall capital market as well as its underlying society.

2017 to stipulate that ESG (environmental, social, andExcept for some assets, GPIF makes daily transactions andgovernance) factors should be taken into consideration in

investments, and exercises voting rights, via external asset

stewardship activities.

managers. Therefore, GPIF promotes constructive(Note)

Chapter 1[1] Objectives and significance of stewardship activities

dialogues (engagement) in consideration of non-financial

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

elements, i.e., ESG factors between external asset

managers entrusted with investment by GPIF assume

managers and investee companies/issuers. Improvement ofstewardship responsibilities to GPIF.

long-term corporate value would lead to the growth of theoverall economy, which will eventually enhance our“Universal owner” and “cross-generational investor” arethe key terms for GPIF to fulfill our stewardshipinvestment returns. GPIF shall fulfill our stewardship

responsibilities appropriately. As a “universal owner” (anresponsibilities by promoting engagement and building a

investor with a very large fund size and a widely diversified

win-win environment in the investment chain.

(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
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

58

Investment Results in Fiscal 2021

6 Stewardship Responsibilities

various activities to fulfill its stewardship responsibilities inthat the reserves are managed and invested safely andequity investment. In September 2015, GPIF signed theefficiently from a long-term perspective” (“Basic Policy ofPrinciples for Responsible Investment (PRI) introduced byReserves”) 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 theInvestment Principles to expand the scope of stewardship

Investment Principles and the Policy to Fulfill Stewardship

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

Responsibilities, and they require external asset managers

on equity investment, and made it clear that ESG factors

to comply with Stewardship Principles and Proxy

should be considered in conducting stewardship activities.

Voting Principles.

Following the revision of “the basic policy meant to ensure

Policy to Fulfill Stewardship Responsibilities
On March 24, 2020, Japan’s Stewardship Code wasrevised the Policy to Fulfill Stewardship Responsibilities inrerevised (hereinafter referred to as “re-revised Code”). The

June 2020. As a major change in the Policy in line with therevision includes adding consideration to sustainability

Investment Principles, GPIF expanded the scope ofissues (medium- to long-term sustainability including ESG

investment target from equities to all types of assets. In

factors) in accordance with investment strategies to theaddition, as a response to individual principles of the re-definitions of stewardship responsibilities, while allowing

revised Code, GPIF clarified ESG considerations. GPIF will

application to a wider range of assets in addition tocontinue to fulfill responsibilities as an asset owner in line

domestic listed equities. Following the revision, GPIF

with the Stewardship Code in all asset classes.

expressed our support for the re-revised Code, and partially

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. The

rights. GPIF requires external asset managers to comply

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 to<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(engagement) with a wide range of stakeholders such as

for the first time to expand the scope of stewardshipindex providers, and active participation in various ESG

activities and cover all asset classes, as it had been

initiatives. Meanwhile, the Proxy Voting Principles made afocused on the equity investment, and newly call for areminder that an exercise of voting rights shall be made as

collaboration of stewardship division and investment

part of a constructive dialogue throughout the year.

division at asset managers, a constructive dialogue
59

Investment Results in Fiscal 2021

GPIF is founded on the Investment Principles, the Policy

6 Stewardship Responsibilities

will continuously examine appropriate stewardship

to Fulfill Stewardship Responsibilities, the abovementioned

responsibilities as a public pension fund and promote

Stewardship Principles, and the Proxy Voting Principles. We

activities to fulfill our stewardship responsibilities.

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 has joined the Asset Owner Technical Advisory Committee, theGlobal Policy Reference Group, the Japan Network Advisory Committee,
etc.

Chapter 1

Participation in global initiatives

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 the aimof achieving 30% female directors.

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.

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

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.

[3] Promotion of activities aimed at fulfilling stewardship responsibilities
Initiatives for the sustainable growth of the whole capital markets
A. Assessment of stewardship activities by external asset managers for fixed income investment
The re-revised Code clearly states that the Code can besuch as their stewardship policies and management ofapplied to investments in assets other than equities.

conflicts of interest. Specifically, we will confirm the

Accordingly, GPIF had considered assessment offollowing points and exchange opinions on how external

stewardship activities by external asset managers for

asset managers have put in place the organizations andbond investment. Subsequently GPIF determined thathuman resources to conduct stewardship activities, andstewardship activities by external asset managers forwill evaluate this as one of the “organization/humanbond investment would be assessed, in terms of theirresources” items in its evaluation criteria.

contribution to encouraging sustainable growth of

Framework (organizations, management of conflicts

investee companies and thus reducing credit risks,

of interest)

starting from the assessment in FY2022.

Endorsement status of Japan’s Stewardship CodeIt cannot be said at this stage that evaluationand the Principles for Responsible Investment (PRI)

methods for individual engagement for bond investment

Policy for stewardship activities

have been fully established, so GPIF has decided to

Response to the GPIF’s Stewardship Principles

evaluate their organizations and human resources for(applicable items), etc.

stewardship activities, including policies and systems

60

Investment Results in Fiscal 2021

6 Stewardship Responsibilities

B. Engagement-enhanced passive investment funds(i) Status of adoption

sophisticated way. For this reason, when appointing

In fiscal 2021, Sumitomo Mitsui Trust Asset Management

domestic equity passive managers, GPIF has decided toCo., Ltd., and Resona Asset Management Co., Ltd., wereassess and select a passive management model that

newly selected as “engagement-enhanced” passive asset

attaches importance to stewardship, in specific terms, amanagers for one of passive investment models focusingbusiness model that unifies the investment process and aon stewardship activities. In fiscal 2018, GPIF selected

policy of stewardship activities, together with an

Asset Management One Co., Ltd., and FIL Investments

organizational structure and fee levels employed to put(Japan) Limited as engagement-enhanced passive asset

them into practice. Since the fee level for these asset

managers, bringing the total to four funds. The expansion

managers is different from that for a general passive

to a four-fund structure has broadened the range ofmanager, GPIF monitors the status of their achievement ofengagement topics and target companies, and

KPIs to measure the success of engagement plans andengagement utilizing the unique characteristics of eachverify and evaluate their milestones for the next year incompany is making steady progress.

order to determine whether to renew their asset(ii) Purpose

management contract on an annual basis.

About 90% of GPIF’s equity investments are passive

The re-revised Stewardship Code points out that bothinvestments in a wide range of listed companies. Since

institutional investors and clients/beneficiaries should share

long-term growth of the overall capital market is essential

the view that reasonable costs associated with thefor GPIF to secure further investment returns, we believe

implementation of stewardship activities are a necessary

that, in passive management, it is important to increase

cost of investment. It indicates that passive managers

long-term corporate value of investee companies and, inshould implement engagement activities more actively fromparticular, to conduct engagement activities in order toa medium-to long-term perspective as it is critical for thempromote sustainable growth of the overall capital market

to encourage investee companies in order to improve theirfrom a long-term perspective. GPIF itself is not allowed tocorporate value given their limited options for selling shares.

engage with investee companies, and needs equity passive

Accordingly, GPIF actively implements engagement

managers to conduct the engagement, taking the above

activities.

purpose into account. Moreover, the re-revised CodeKey Points for selection

stipulates that both institutional investors and clients/<Setting of appropriate KPIs>

beneficiaries should recognize that an appropriate amount- Medium- to long-term goals for engagement activities

of costs associated with stewardship activities is an- Annual plan for the achievement (milestone)

indispensable element in asset management. GPIF has<Engagement system and method>come to the conclusion that domestic equity passive- Organizations and persons in charge of stewardshipmanagers need to have an environment that allows them toactivities

continue conducting stewardship activities and promoting- Methods of Engagement

engagement with companies in a deeper, and more

②Other activities for enhancing investment chain
To further invigorate the investment chain, in fiscal 2015,

perceived by investee companies. As part of its efforts to

GPIF started conducting a survey of listed companies on

promote dialogues between asset managers and investee

external asset managers’ stewardship activities for thecompanies, GPIF also publishes “excellent disclosures”

purpose of confirming how their stewardship activities are

selected by GPIF’s external asset managers.

A. Conducting a Survey of Listed Companies regarding Institutional Investors’ Stewardship Activities＜Objective of the survey＞

61

As GPIF entrusts domestic equity investment to external asset

conducted the first “Survey of Listed Companies regarding

managers, we request them to enhance their stewardship

Institutional Investors’ Stewardship Activities” in fiscal 2015, ofactivities. To ascertain how investee companies receive asset

JPX Nikkei Index 400 companies. The purpose of this survey tomanagers’ stewardship activities, including engagement, GPIF

listed companies is to examine the validity of the stewardshipInvestment Results in Fiscal 2021

6 Stewardship Responsibilities(engagement)” of asset managers as well as understanding any

companies that are the target of external asset managers’

changes during the year since the previous survey. 709

stewardship activities and to strengthen the investment chain

companies responded (accounting for 32.5%): 37.0% of Primeby publishing the survey results. In fiscal 2021, GPIF conductedMarket companies and 9.1% of Standard Market and Growth

the seventh survey, by sending questionnaires to the First

Market companies.

Section of the TSE-listed 2,183 companies* for the purpose of* The number of companies is as of December 16, 2021.

Chapter 1

activities of asset managers by directly surveying listed

assessing stewardship activities and “constructive dialogue＜Summary of the results of the survey＞
For the first time, more than 50% of companies answered“Corporate Governance” at 71.7% (+/-0%), “Diversity” atthat they have seen positive change in attitude of institutional

55.0% (+11.8%), and “Human Rights & Community” atinvestors at IR meetings, etc. over the preceding year. The

43.2% (+6.2%).

survey results show a significant increase in the number of

The survey results thus indicate that interest in a widecompanies endorsing the Task Force on Climate-Related

range of ESG topics is growing, mainly items on the

Financial Disclosure (TCFD) recommendations and disclosing

Supplementary Principles that are added to the revised

TCFD-related and other non-financial information. In addition,

Corporate Governance Code, and items exemplified as

many companies are considering preparing Integrated

sustainability issues, including not to mention governance (G),Reports and endorsing the TCFD recommendations,as well as environmental (E) issues such as climate change,

suggesting that companies will continue to disclose non-and social (S) issues such as the impacts of the COVID-19

financial information from here on. At the same time, thepandemic that seem to reflect recent global circumstances.

survey found that companies are perceiving positive changes

Many companies expect to GPIF: (1) encouragein investors’ interest in and use of such non-financial

constructive dialogue from a medium- to long-term

information.

perspective; (2) promote ESG investment; and (3) continue“Climate Change” was designated by 77.9% of thedisclosure. For more details on the results, please refer tocompanies (+14.3% from the previous survey) as the mostthe website: https://www.gpif.go.jp/en/esg-stw/

important theme of their ESG activities, followed bystewardship/.

Response rate by company size

Response coverage rate
* Inside: based on number ofcompanies
Outside: based on market cap

84.0

Large caps

84.8

709

28.8%

companies

32.5%

65.5

Medium caps

64.1

Responded
Small caps

Did not
respond0

1,474 companies
67.5%

21.6

This survey
Previous survey

20.2
20

40

60

80

100
(%)

71.2%

62

Investment Results in Fiscal 2021

6 Stewardship Responsibilities

Institutional investors utilization of integrated reports(i) They appear to use the reports
more effectively than before.

(ii) They show no significant
changes.

This survey

63.5

33.7

2.7

Previous
survey

61.7

35.8

2.5

Surveybefore last0

Response rate by market segment(iii) They do not appear to use
the reports effectively.

Standard / Growth

50.0
20

46.3
40

60

37.0

Prime

9.1

3.7
80

100
(%)

0

10

20

30

40

50
(%)

B. Expansion of “Excellent Disclosure” initiatives selected by GPIF’s asset managers - “Excellent TCFD Disclosure” published GPIF believes that disclosure is an extremely important

the Prime Market in particular “should strive to enhance theelement for investors engaging in dialogue with their

quality and quantity of disclosure based on the TCFD

investee. From this perspective, GPIF has asked ourrecommendations or an equivalent framework.” Many

external asset managers to select excellent disclosure andcompanies in Japan have already endorsed the TCFD

published “excellent Integrated Reports,” “Most-improved

recommendations, and disclosure should begin to take off

Integrated Reports,” etc., to encourage companies to startin earnest in the near future. In addition, the TCFD is acreating and enhance voluntary disclosure such ascommon global disclosure framework and it has been a

integrated reports as well as to encourage investors to

topic in the ongoing international discussions on non-utilize such disclosure. In fiscal 2021, GPIF newly requested

financial disclosure, so that its importance is expected toexternal asset managers of domestic and foreign equity

increase in future. It is likely that TFCD-related disclosure

investments to select excellent TCFD disclosure andwill become indispensable for global companies, and thatpublished these selections. The TCFD recommendations

investors will need more than ever to consider how to utilize

are also referred to in the Corporate Governance Codethis information in dialogues.

revised in June 2021, which states that companies listed on

63

Investment Results in Fiscal 2021

6 Stewardship Responsibilities[4] Material ESG issues recognized by external asset managers
they view as critical. Both domestic and foreign equity

asset managers should proactively engage with investee

managers appear to be emphasizing a broadening range ofcompanies on material ESG issues. For this reason, each

topics – E and S as well as G – but all respondents citedyear GPIF asks our external asset managers to identify what

“Board Structure & Self-evaluation,” “Minority Shareholder

they consider to be significant ESG issues. The results for

Rights” and “Disclosure,” indicating that they consider G

fiscal 2021 were as follows. All of the passive equity(governance) issues to be the most important issues. In

managers that keep holding shares in portfolio companies

particular, “Disclosure” was cited as a critical issue by all

identified “Disclosure,” “Climate Change,” “Diversity,” anddomestic equity and bond investment managers, showing“Supply Chain” as significant ESG issues, and recognizedthat disclosure is important to Japanese companies

long-term issues including “E” (environmental) and “S” (social)regardless of the type of asset. Specifically, the survey foundas particularly critical. The change from the previous yearthat what external asset managers consider to be important

was outstanding in “Biodiversity,” with an increasing number

are the content of disclosure as well as the way ofof both domestic and foreign passive equity managers

information is disclosed, including the preparation andconsidering it critical. On the other hand, for active

enhancement of Integrated Reports, disclosure ofmanagers whose investment periods range primarily from agreenhouse gas (GHG) emissions, disclosure policies,

few months to a few years, we found a split between

communications with investors, and disclosures in English.

Chapter 1

In the Stewardship Principles, GPIF requires that our external

domestic and foreign equity managers on the ESG issues<Passive managers ofdomestic equities>
Climate Change

100%<Active managers ofdomestic equities>
Board Structure &Self-evaluation

100%<Passive managers of
foreign equities><Active managers of
foreign equities>＜Domestic bonds＞＜Foreign bonds＞

Climate Change

100%

Climate Change

100%

Disclosure

100%

Climate Change

95%

Corporate Governance 100%

Minority Shareholder Rights 100%

Supply Chain100%

Supply Chain

86%

Climate Change

93%

Corporate Governance70%

Disclosure

100%

Disclosure

100%

Disclosure

100%

Disclosure

86%

Corporate Governance79%

Health and Safety70%

Supply Chain100%

Supply Chain

88%

Diversity

100%

Corporate Governance86%

Board Structure &Self-evaluation

64%

Supply Chain

65%

Diversity

100%

Climate Change

88%

Corporate
Governance75%

Other (Social)86%

Supply Chain

57%

Pollution &Resources

65%

Misconduct

100%

Capital Efficiency

88%

Other (Social)

75%

Health and Safety

86%

Diversity

57%

Human Rights & Community

65%

Board Structure &Self-evaluation

83%

Diversity

75%

Health and Safety

75%

Board Structure &Self-evaluation

86%

Environment
Opportunities

57%

Labor Standards

65%

Minority Shareholder Rights

83%

Misconduct

75%

Board Structure &Self-evaluation

75%

Human Rights &Community

86%

Misconduct57%

Anti-Corruption

60%

Capital Efficiency

83%

Human Rights & Community

75%

Water Stress & Water Security

75%

Social Opportunities

71%

Human Rights & Community

83%

Waste Management

75%

Other (Governance)

75%

Diversity

57%

Biodiversity

83%

Corporate Governance

63%

Other (Environment)

75%

Water Stress & Water Security

57%

Waste Management

67%

Environmental Opportunities

63%

Deforestation

75%

Environmental Opportunities

57%

Environmental Opportunities

67%

Other (Governance)

63%

Risk Management

75%

Capital Efficiency

57%

Other (Social)

67%

Pollution & Resources

63%

Biodiversity

75%

Minority Shareholder Rights

57%

Health and Safety

67%

Labor Standards

63%

Labor Standards

57%

Water Stress & Water Security

67%

Product Liability

67%

Deforestation

67%

Anti-corruption

67%…E (Environmental)…S (Social)…G (Governance)…A multiple themes of ESG(Note 1) A survey on external asset managers for equities and bonds was conducted in December 2021.
(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.

64

Investment Results in Fiscal 2021

6 Stewardship Responsibilities[5] Exercise of voting rights
Concept of the exercise of voting rights
The Medium-term Objectives established by the Minister of(environmental, social, and governance) materiality that leads to

Health, Labour and Welfare stipulate that GPIF “should takelong-term investment returns. When doing so, GPIF shall clarify

appropriate measures including exercise of voting rights whilethat stewardship activities including the exercise of voting rights

giving due consideration to influence on corporate management.”

by our external asset managers aim to improve long-term

In this regard, GPIF in its Medium-term Plan states, “GPIF itself

investment returns solely for the pension beneficiaries.”

does not exercise voting rights and instead entrusts the external

External asset managers submit the guideline for voting andasset managers with the exercise of voting rights so as to avoid

annually report voting results to GPIF. GPIF holds meetings withgiving a direct influence on corporate management. However,managers on the results, and evaluates the way in which afrom the viewpoint of further promoting its stewardship activities,

manager exercises voting rights in the annual assessment

GPIF shall conduct efficient engagement when entrusting an

meeting, considering their exercise as an item of initiatives forexternal asset manager, with an awareness of ESG

fulfilling stewardship activities.

Exercise of voting rights in fiscal 2021
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 2021. Then, we

framework,” and “the status of exercise of voting rights.” Asevaluated asset managers based on the reports and thea result, we confirmed that voting rights were appropriately

meetings from the viewpoints of “establishing of guidelines

exercised.

The status of exercise of voting rights by external asset managers for domestic equities (from April 2021 to March 2022)
Number of external asset managers who exercised voting rights: 40 funds
Number of external asset managers who did not exercise voting rights: none
(Unit: No. of proposals, percentage)
Proposals pertaining to director
remuneration, etc.

Proposals pertaining to company organization
Proposal
External
directors

Appointmentof auditors

Number of voting
rights exercised

167,987

63,01915,577

10,405

693

Shareholder proposals Management proposals

167,465(100.0%)149,145(89.1%)
18,320(10.9%)
522(100.0%)47(9.0%)
475(91.0%)

62,824(100.0%)55,445(88.3%)
7,379(11.7%)
195(100.0%)41(21.0%)
154(79.0%)

15,561(100.0%)13,688(88.0%)
1,873(12.0%)
16(100.0%)8(50.0%)
8(50.0%)

10,397(100.0%)8,594(82.7%)
1,803(17.3%)
8(100.0%)5(62.5%)
3(37.5%)

693(100.0%)693(100.0%)0(0.0%)
0(0.0%)
0(0.0%)
0(0.0%)

Total
Approved
Opposed
Total
Approved
OpposedDirector
bonuses

Director
retirement
benefits

Grantingof stock
options

7,592

1,086

876

7,539
(100.0%)6,971(92.5%)
568(7.5%)
53(100.0%)5(9.4%)
48(90.6%)

1,086(100.0%)932(85.8%)
154(14.2%)
0(0.0%)
0(0.0%)
0(0.0%)

876(100.0%)127(14.5%)
749(85.5%)
0(0.0%)
0(0.0%)
0(0.0%)

Appointment
Directorof accounting
remuneration
auditors

Appointment
of directors

External
auditors

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

Poison Pills(Rights plan)

Other
proposals

Total

Dividends

Acquisitionof treasury
stock

Mergers,
acquisition,etc.

the articles ofincorporation

Warning
type

Trust–type

1,435

13,511

94

790

7,899

465

1

234

218,240

1,435(100.0%)1,170(81.5%)
265(18.5%)
0(0.0%)
0(0.0%)
0(0.0%)

13,396(100.0%)13,234(98.8%)
162(1.2%)
115(100.0%)28(24.3%)
87(75.7%)

7(100.0%)7(100.0%)0(0.0%)
87(100.0%)21(24.1%)
66(75.9%)

790(100.0%)747(94.6%)
43(5.4%)
0(0.0%)
0(0.0%)
0(0.0%)

6,799(100.0%)6,540(96.2%)
259(3.8%)
1,100(100.0%)89(8.1%)
1,011(91.9%)

465(100.0%)21(4.5%)
444(95.5%)
0(0.0%)
0(0.0%)
0(0.0%)

1(100.0%)0(0.0%)
1(100.0%)0(0.0%)
0(0.0%)
0(0.0%)

213(100.0%)155(72.8%)
58(27.2%)
21(100.0%)2(9.5%)
19(90.5%)

216,326(100.0%)
193,430(89.4%)
22,896(10.6%)
1,914(100.0%)200(10.4%)
1,714(89.6%)(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 5 abstentions.

The status of exercise of voting rights by external asset managers for foreign equities (from April 2021 to March 2022)
Number of external asset managers who exercised voting rights: 23 funds
Number of external asset managers who did not exercise voting rights: none
(Unit: No. of proposals, percentage)

Proposal

Proposals pertaining to company
organization

65

Appointment of
Directoraccounting
remuneration
auditors

Director
bonuses

Director
retirement
benefits

Granting ofstock
options

Total

Number of voting
rights exercised

114,574

4,580

12,71826,931

149

181

6,513

10,017

5,767

10,766

8,456

192

12,352

54,214

267,410

Shareholder proposals Management proposals

Appointment of Appointment of
directors
auditors

Proposals pertaining to director
remuneration, etc.

Proposals pertaining to capital management Proposals(excluding items pertaining to amendment pertaining to Poison Pills
Other proposalsof the articles of incorporation)
amendment of for warning
Approval of
Mergers,
Acquisition of
Other
type
the articles offinancialacquisition,
Dividends
treasury stock
proposals
incorporationetc.
statement, etc.

113,195(100.0%)91,426(80.8%)
21,769(19.2%)
1,379(100.0%)819(59.4%)
560(40.6%)

4,190(100.0%)3,518(84.0%)
672(16.0%)
390(100.0%)333(85.4%)
57(14.6%)

12,658(100.0%)
11,136(88.0%)
1,522(12.0%)
60(100.0%)56(93.3%)
4(6.7%)

26,700(100.0%)21,158(79.2%)
5,542(20.8%)
231(100.0%)58(25.1%)
173(74.9%)

147(100.0%)128(87.1%)
19(12.9%)
2(100.0%)1(50.0%)
1(50.0%)

179(100.0%)151(84.4%)
28(15.6%)
2(100.0%)0(0.0%)
2(100.0%)6,508(100.0%)4,358(67.0%)
2,150(33.0%)
5(100.0%)1(20.0%)
4(80.0%)

9,991(100.0%)9,719(97.3%)
272(2.7%)
26(100.0%)18(69.2%)
8(30.8%)

5,758(100.0%)5,503(95.6%)
255(4.4%)
9(100.0%)0(0.0%)
9(100.0%)10,734(100.0%)8,764(81.6%)
1,970(18.4%)
32(100.0%)19(59.4%)
13(40.6%)

7,961(100.0%)7,258(91.2%)
703(8.8%)
495(100.0%)199(40.2%)
296(59.8%)

187(100.0%)140(74.9%)
47(25.1%)
5(100.0%)5(100.0%)0(0.0%)

12,352(100.0%)11,734(95.0%)
618(5.0%)
0(0.0%)
0(0.0%)
0(0.0%)

49,837(100.0%)42,280(84.8%)
7,557(15.2%)
4,377(100.0%)2,061(47.1%)
2,316(52.9%)

260,397(100.0%)217,273(83.4%)
43,124(16.6%)
7,013(100.0%)3,570(50.9%)
3,443(49.1%)

Total
Approved
Opposed
Total
Approved
Opposed(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 3,994 abstentions.

Investment Results in Fiscal 2021

7 ESG Activities

7 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 investment in order to reduce negative

to an investor with a well-diversified portfolio that largely

externalities such as environmental and social issues, andrepresents the world’s capital market. GPIF is a typicalto improve the sustainable return from the whole assets,“universal owner” with a broadly diversified portfolio

as GPIF is a “Universal owner” and “Cross-generational

comprised of equities and bonds of the majorities ofinvestor.” “Universal owner” is a term often used in relation

Japanese listed companies and major foreign companies.

to pension management and ESG investment, referring
The number of securities owned by GPIF (as of the end of March 2022)
4,000

3,573

（The number of securities）

3,500
3,000
2,500

2,175

2,347

2,679

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

66

Investment Results in Fiscal 2021

7 ESG Activities

GPIF shall manage pension reserves in line with thehas published the ESG Report since fiscal 2018. In

basic policy that is meant to ensure that the reserves

fiscal 2021, we published ESG Report 2020, the 4th

are managed and invested safely and efficiently from aissue. GPIF expressed our support for the declaration

long-term perspective (hereinafter referred to as theof the Task Force on Climate-Related Financial“Basic Policy of Reserves”) announced in accordance with

Disclosures (TCFD) in 2018, and has published thethe Employees’ Pension Insurance Act. The Basic Policy

ESG Report including a disclosure in line with theof Reserves was revised in February 2020, stipulating

TCFD recommendations, starting from 2018. ESG

that the sustainability of investee companies and theReport 2020 presents not only the performance of ESG

overall markets will be critical for the improvement ofindexes and other direct investment results but also

long-term investment returns in the management of

quantitative analyses of trend in ESG ratings of portfolios

pension reserves. It also stipulates that the reserve funds

and Japanese companies and of the effectiveness ofshall implement the necessary initiatives by individuallyengagement. A wide range of analysis of climate change

examining the promotion of investments that consider

risks and opportunities are provided in the “ESG Report”

ESG (environmental, social, and governance) as

as well as in the “FY2020 Analysis of Climate Change-

nonfinancial factors in addition to financial factors, fromRelated Risks and Opportunities in the GPIF Portfolio.”

the viewpoint of securing long-term investment returns for

GPIF will continue verifying the effect of ESG initiatives

the interest of pension beneficiaries, adding provisions on

to improve ESG related activities. Recently, among climate

specific ESG considerations (applicable from April 2020).

change related risks and opportunities and governanceEvaluation of ESG promotion activities requires thethemes, investors and companies have been showing

following perspectives: (1) it takes a long period of time forinterest in initiatives and information disclosure related tothe effects of ESG investment to materialize; and (2) ESG

natural capital and human capital. GPIF will continue toinvestment is also aimed at improving the sustainability

keep a watchful eye on these new movements, especiallyof the entire capital market. These perspectives arefrom the perspective of effects on GPIF’s portfolio.

different from general investment evaluation of how muchinvestment returns are generated over a certain period.
In order to evaluate these ESG initiatives to confirm theeffect of investment while ensuring the transparency, GPIFFY2020 Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio

Expansion of
ESG investment

Improving thesoundness of pension
finance

Building
sustainable
society

Improvement ofrisk-adjusted returns

67

Increasing
incentives to enhance theresponse to ESG
by companies

Improvement of the
ESG evaluation ofcompanies

Investment Results in Fiscal 2021

7 ESG Activities(Column) GPIF named as a Leader in “Responsible Asset Allocator” list
GPIF was named by American think tank, New America, as a Leader in the 2021 Leaders List of “The 30 Moston their responsible investing practices, ranging widely from information disclosure to ESG integration, based on
the Responsible Asset Allocator Initiative (RAAI) index, developed in partnership with the Fletcher School at

Chapter 1

Responsible Asset Allocators.” Every two years, New America analyzes sovereign wealth funds and pension funds

Tufts University.
The RAAI Index evaluates a total of 30 indicators, three detailed indicators for each of the ten principles
required for responsible and sustainable investment. A wide range of evaluation criteria is included, such as
the objectives for its responsible investment, the status of ESG integration, the availability of ESG investment
performance measurements, and the disclosure of information on these themes. GPIF received perfect scores in
29 of the 30 indicators, the one exception being “Takes an innovative approach to RI,” resulting in a high overall
score of 98.
In 2021, 251 organizations were evaluated, and GPIF ranked alongside the Norway Government Pension Fund
Global, APG Group of the Netherlands, and California State Teachers’ Retirement System (CalSTRS) in the UnitedStates. We were the only Asian pension fund to be selected as a Leader in 2021. This is GPIF’s second consecutive
inclusion in the Leaders List, after being named in 2019.

68Investment Results in Fiscal 2021

7 ESG Activities[2] Passive investment based on ESG indexes
In fiscal 2017, GPIF selected two comprehensive indexes

After a review of comprehensive ESG indexes forand one thematic index focused on gender diversity fordomestic equities, the following index was adopted anddomestic equities, and commenced passive investment

began passive investment into domestic equities based on

tracking those indexes. The selection criteria for the ESG

the index.
As of the end of fiscal 2021, total ESG index-based

indexes included economic rationality based on the risk-

investments have grown to approximately ¥12.1 trillion.

return profile of each index and the possibility of theseindexes to boost the equity market in Japan throughTheme

improvement of ESG evaluation.

Index Name

Comprehensive FTSE Blossom Japan Sector Relative Index

In fiscal 2018, with climate change increasingly
becoming serious, GPIF selected the S&P/JPX Carbon(Primary screening criteria)

Efficient Index for Japanese equities and the S&P Global Ex-① ESG ratings play a central role in the constituent
selection/weighting process

Japan Large Midcap Carbon Efficient Index for foreign
equities. These are stock indexes designed to measure the② ESG ratings for the index are highly transparent, andthe evaluation method is easy to understand forcarbon efficiency of companies (greenhouse gas emissions
divided by revenues) in the indexes and GPIF commenced

companies so that the index can be expected topassive investment tracking those indexes.

boost overall market.

Moreover, in fiscal 2019, GPIF announced the launch of③ The index does not include negative screening, suchas excluding companies in specific sectors or

the “Index Posting System” (IPS)−a new framework forcollecting index information on a continuous basis−in orderindustries.

to efficiently gather various index information for the purpose④ The index has a relatively small tracking error
compared to a parent index and is a tilted index withof enhancing our overall fund management. IPS has started
collecting information.

a large investment capacity or an index with a large

In fiscal 2020, the Board of Governors passed anumber of constituents.

resolution on “Practical Guidelines for the Selection of ESG
indexes” setting forth basic policies for selecting ESG

We hope that these ESG indexes will serve as anindexes and, in accordance with these guidelines, etc., GPIF

incentive for various companies to introduce ESG into

began passive investment in foreign stocks tracking thecorporate management, and eventually improve

MSCI ACWI ESG Universal Index and the Morningstar

corporate value in the long run.

Gender Diversity Index (commonly known as “GenDi”).

List of selected ESG indexes
Thematic indexes

Comprehensive indexes

FTSE Blossom
Japan Index

E( Environmental )S&P/JPX
Carbon EfficientIndex Series

FTSE Blossom
Japan Sector Relative Index
MSCI JapanS( Social )MSCI Japan Empowering
Women Index (WIN)ESG SelectLeaders Index
MSCI ACWIESG Universal Index

69

G( Governance )Morningstar Gender
Diversity Index(GenDi)Investment Results in Fiscal 2021

7 ESG Activities

Comprehensive Indexes· This index uses the ESG
assessment scheme used in the
FTSE4Good Japan Index Series,
which has one of the longest
track records globally for ESG
Russell indexes.
Concept andcharacteristics of · It is a comprehensive ESG index
index
that selects stocks with highabsolute ESG scores and adjusts
industry weights to neutral at theindustry level.

MSCI ACWI ESG Universal
Index· Assessments are performed basedon FTSE Russell’s ESG rating which
FTSE Blossom Japan Index alsouses. For the companies with highcarbon intensity (greenhouse gas
emissions/ sales), management
attitude toward climate-changerisks/opportunities is also assessed.
· The index is comprised of stocks
with relatively high ESG ratings
within each industry, and adjusts
industry weights to neutral at asector level.

· The MSCI Japan ESG
Select Leaders Index is acomprehensive ESG index that
integrates various ESG risks into
today’s portfolio. The index isbased on MSCI ESG Researchused globally by more than 1,000
clients.
· The index is comprised of stocks
with relatively high ESG scores ineach industry.

· One of MSCI’s flagship ESG indexes,
this comprehensive index adjusts
the weight of constituents basedon each issuer’s current ESG ratingand ESG trends to elevate the ESG
metrics of the index overall.
· The index was developed for large
investors seeking to enhance ESG
integration while achieving the samelevel of investment opportunity andrisk exposure as the parent index.

Index
Construction

Best-in-class

Best-in-class

Best-in-class

TiltedInvestment Target

Domestic Equities

Domestic Equities

Domestic Equities

Foreign Equities

MSCI JAPAN IMI TOP 700[699 stocks]

MSCI ACWI ex Japan ex China A
ESG Universal with Special
Taxes Index[2,180 stocks]

Constituent
universe(parent index)

FTSE JAPAN ALL CAP INDEX FTSE JAPAN ALL CAP INDEX[1,395 stocks][1,395 stocks]

Number of index
constituents

229

493

222

2,111

Assets undermanagement¥983.0 billion¥800.0 billion¥2,099.0 billion¥1,618.7 billion

Chapter 1

FTSE Blossom
Japan Index

MSCI Japan ESG SelectLeaders Index

FTSE Blossom
Japan Sector
Relative Index

ESG thematic indexes (women’s advancement/climate change)
MSCI Japan
Empowering
Women Index (WIN)Morningstar Gender
Diversity Index(“GenDi”)

S&P/JPX
CarbonEfficient Index

S&P Global
Ex-Japan
LargeMidCap
CarbonEfficient Index

・MSCI calculates the genderdiversity scores based on
information disclosed under the
Act on Promotion of Women’sParticipation and Advancementin the Workplace and selects
companies with higher gender
diversity scores from eachsector.
・The first index designed to covera broad range of factors related
to gender diversity.

・Determines investment
weighting based on assessmentof companies’ commitment
to gender equality, using theEquileap Gender Equality
Scorecard.
・Ratings are conducted in four
categories: (1) gender balancein leadership and workforce;(2) equal compensation andwork-life balance; (3) policies
promoting gender equality; and(4) commitment, transparency,
and accountability.

・Constructed by S&P Dow Jones
Indices based on carbon data
provided by Trucost, a pioneer inenvironmental assessment.
・This index is designed to
overweight companies that havelower carbon footprints (annual
greenhouse gas emissions
divided by annual revenues) andthat actively disclose their carbon
emission information.

・Constructed by S&P Dow Jones
Indices based on carbon data
provided by Trucost, a pioneer inenvironmental assessment.
・This index is designed to
overweight companies that havelower carbon footprints (annual
greenhouse gas emissions
divided by annual revenues) andthat actively disclose their carbon
emission information.

Index
Construction

Best-in-class

TiltedTiltedTiltedInvestment Target

Domestic Equities

Foreign Equities

Domestic Equities

Foreign Equities

Constituent
universe(parent index)

MSCI JAPAN IMI TOP 700[699 stocks]

Morningstar® Developed Markets
Ex-Japan Large-Mid[2,177 stocks]

TOPIX[2,175 stocks]

S&P Global Ex-Japan
LargeMidCap (3,080 stocks)

Number of index
constituents

352

2,149

1,855

2,428

Assets undermanagement¥1,245.7 billion¥419.5 billion¥1,567.8 billion¥3,390.6 billion

Index
concept(Source) Prepared by GPIF based on FactSet, etc.
(Note) Number of index constituents and assets under management are as of March 31, 2022.

70

Investment Results in Fiscal 2021

7 ESG Activities

GPIF believes that in order to encourage companies toproactively engage with companies. As a result, both FTSE

address ESG issues and disclose information proactively, it

and MSCI have significantly expanded the coverage of ESG

is important to help them deepen their understanding of theevaluation, which lead to increased dialogue between index

principles of ESG evaluation and index construction. To

providers and companies. It is hoped that this will lead topromote such understanding, GPIF requests for index

improvement in responses to ESG issues and information

providers to publicly disclose ways in which they conduct

disclosure by Japanese companies.

ESG evaluation and construction of indexes, and to(%) Percentages of companies that made contact with MSCI during the ESG evaluation process

90
80
70
60
50
40

Japan

30

Europe20

North America

10
0

2016

2017

2018

2019

2020

2021

Others(APAC ex Japan)

Reproduced by permission of MSCI ESG Research LLC ©2022. All rights reserved.
(Note) Universe is MSCI ACWI constituent companies. The above graph has been created by selecting only major countries with 40
or more MSCI ACWI constituent companies. Constituents in individual indexes at the end of each year (December) were used
to calculate the rate of inquiries.

71

Investment Results in Fiscal 2021

7 ESG Activities[3] ESG integration in fixed income investment
both members of the World Bank Group, and thenprovides asset managers with an opportunity to invest

expanded to major multilateral development banks

in green, social, and sustainability bonds issued byincluding the European Investment Bank (EIB) and themultilateral development banks including the World

Asian Development Bank (ADB). In addition to this, inBank Group and governmental finance agencies of

2019, GPIF also established partnerships withindividual countries, which provide external asset

governmental finance agencies. As of March 31, 2022,

managers with an opportunity for ESG integration in

we have built investment platforms with ten multilateral

fixed income investment and obtaining excess returns

development banks and six government financeagainst government bonds. Behind this, (i) demand foragencies. The investment in green bonds, social bonds

green bonds often exceeds supply in the primary(including COVID-19 bonds issued to finance solutions

market, and it is difficult to purchase them in theto the challenges from COVID-19) and sustainability

secondary market because many of the investors tend

bonds through these platforms reached ¥1.6 trillion as

to hold them until maturity; and (ii) GPIF has sought aof the end of March 2022 (calculated by GPIF based on

way to secure investment returns because it holds

Bloomberg data for bonds in compliance withbonds worth, most of which are government bonds

principles, etc. of International Capital Market

issued by developed countries including Japan and

Association (ICMA)).

Europe where government bonds with negative yield

Chapter 1

GPIF has established an investment platform which

GPIF promotes ESG integration not only in equity

have become more common. This initiative started withinvestment but also fixed income and other asset

entering into a partnership with the International Bank

classes in order to reduce the negative impacts offor Reconstruction and Development (IBRD) and theenvironmental and social issues and improve long-term

International Finance Corporation (IFC) in April 2019,

returns on its entire investment assets.

72

Investment Results in Fiscal 2021

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. Status of the introduction of the Asset Manager Registration System
GPIF expanded the scope of the Asset Manager

The number of
entries

Asset class

Registration System to all four traditional asset classes in
February 2018. The status of registration of external
asset managers as of the end of fiscal 2021 is as listed in
the right table.

The number of
information provided

Domestic bonds

5

6

Foreign bonds

258

15

Domestic equities

41

5

Foreign equities

311

31

B. Review of the Asset Manager Registration System for all four traditional asset classes
Data management for the Asset Manager Registration

completion of the process simply by registering with

System for the four traditional asset classes was

GPIF. We utilize external databases for performanceoutsourced and applicants were required to update

data, and applicants are asked to submit data to GPIF as

performance data for registered products but, due to thenecessary.

heavy burden of data updating, the process waschanged in November 2021 with a decision to allow
C. Selection for four traditional asset classes
With the aim to improve the long-term return from the overall assets under management, we selected five active
domestic bond funds and two passive foreign bond funds in fiscal 2021.
D. Call for applications for managers of alternative assets
GPIF has been calling for applications for asset

GPIF selected one external asset manager for a foreign

managers who will implement multi-manager investment

real estate mandate in fiscal 2018, one external asset

strategies for alternative assets (infrastructure, private

manager for a global PE mandate in fiscal 2019, one

equity, and real estate) since April 2017, with the aim ofexternal asset manager for a global PE mandate, one

improving efficiency through investment diversification.

external asset manager for a foreign real estate mandate

Following the selection of one external asset manager forin fiscal 2020, and one external asset manager for aa domestic real estate mandate and three external asset

domestic PE mandate in fiscal 2021, and we havemanagers for an infrastructure mandate in fiscal 2017,

started investing in those assets.

Flexibly adopt new
asset managers

GPI F
Data Entry

73

Assessment

New Manager

New Manager

New Manager
New Manager

Evaluation

Data Management

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

New Manager

Existing Manager

Existing Manager

Competition

Investment Results in Fiscal 2021

8 Other Major Initiatives

The selection process and screening criteria for external asset managers
B. In accordance with Stewardship Principles witheffectively, GPIF shall specify the profiles anda provision of “ESG Integration into Investment

investment capabilities of products and managers

Process” requesting ESG integration to external asset

to select. In the first screening process, we check

managers, GPIF shall assess if they integrate ESG innecessary qualification conditions of the applying

investment analysis and investment decisions explicitly

managers. Then, qualified products are appraised

and systematically on “Investment process,” which isin the second screening process. Through focused

one of assessment criteria.

Chapter 1

A. In order to conduct each selection quickly andevaluation of the application materials, we appraise
whether the products and managers do meetwith the specified features. Then, candidates are
narrowed down to the third screening process, where
we do thorough investigation for the final decisionof selection. We used to finalize comprehensive
assessment and adoption simultaneously, but has
started to finalize only an assessment in the third
screening process, and then make a final decisionby considering the composition of external asset
managers, so that we could improve the consistencyof 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.
●

74

Investment Results in Fiscal 2021

8 Other Major Initiatives

Management and assessment of external asset managers, etc.
A. Management and assessment of external asset managers
To better manage external asset managers, GPIF hasbond fund because changes in their investment structure

requested that monthly reports be submitted on

had raised concerns about their investment capabilities.
Oversight of transition managers among the external

investment performance and risk status to ascertain thestatus of compliance with investment guidelines, and we

asset managers was carried out by requestingreceive further explanations in regular meetings andsubmission of reports related to transactions whenother activities.

carrying out transitions, checking on transaction costs

In fiscal 2021, meetings were held focusing on fundswith possible management concerns. As a result ofand compliance with investment guidelines, holding
meetings as necessary to receive explanations, etc.
The remuneration system for active asset managers

comprehensive evaluations appropriate actions weretaken, including the cancellation of one active domestic

is based on a remuneration rate proportional to excess

equity fund and the issue of warnings to one passive

return (i.e., performance-linked remuneration), anddomestic equity fund and one active foreign equity fund.

remuneration is on par with that for passive management

Besides the comprehensive evaluations, we closed(i.e., base remuneration) if excess return is not earned.

two active domestic stock funds and one active foreign
B. Management and assessment of custody service providers
Custody service providers were managed by conducting

operational structures, internal controls, asset

regular meetings, including online meetings, at which

management systems, global custody, and information

explanations were received on the progress of

security measures. Based on the information received,

operations and such topics, and holding other meetings

GPIF conducted comprehensive evaluations of eachas needed to address specific issues. In addition, GPIF

custody service provider based on operational policies

requested the submission of materials pertinent towith an understanding of each custody service provider’scustody services once a year to ascertain the custodystrengths and issues.

service providers’ organizations, human resources,
C. Reviewing our asset management activities
In recent years, as GPIF’s investment activities has

diversification and sophistication of our investments andbecome more diversified and sophisticated, theto enhance the effectiveness of our communications withapproaches taken by custody service providers has

external asset managers, it is necessary to collectbecome more complicated. Facing this trend, GPIF has

transaction data more promptly than ever for use in risk

been optimizing the structure of our custody service

analysis and other purposes. To this end, GPIF has

providers (including the ones for global custody services)established a system to collect transaction data directlyto accommodate further diversification andfrom external asset managers for use in investment

sophistication in its investments, based on

decisions in addition to the data collected from custody

comprehensive evaluations of our custody service

service providers for use in accounting. GPIF will

providers and other factors including management costs

continue organizing our framework to facilitate further

and business continuity plans (BCP).

usage of these data.

To precisely manage risks associated with the further(Note) For the list of external asset managers, etc., refer to pages 90・91.

75

Investment Results in Fiscal 2021

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
In 2021, the ceremony for the fifth GPIF Financesophisticated and financial products are growing theirAwards was held. The award winner was determined asdiversities. Accordingly, 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, Professor

are invested safely and efficiently.

of MIT (Nobel laureate in economics in 1997).

Chapter 1

Today, investment techniques are becoming increasinglyAward winner : Dr. NAKATA Taisuke, Associate Professor at the University of Tokyo
Profile: After earning a BA in Economics from the University of Chicago, serving as an Assistant Economist
in the Federal Reserve Bank of Kansas City’s Research Department, completing a PhD in Economics
at New York University, and then joining the Federal Reserve System Board of Governors’ Research
Department as Chief Economist, he was appointed to his current position in 2020.

Selection
Reason: Associate Professor Taisuke Nakata has conducted high quality researches focusing on important andtimely topics--including analysis on changes in monetary policy effects and effects of uncertainty to theeconomy under the zero-interest rate lower bound. He has consistently generated valuable research
outputs which are expected to be well applied to the pension investment management practices. In
addition, he has recently worked on topics on the change factors of equilibrium yield curves under
the zero-interest rate lower bound, which are expected to make further contributions to the field offinance.

Selection committee members
Robert C. Merton

Nobel Laureate in Economic Sciences, The School of Management Distinguished Professor of Finance

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 at Kyoritsu Women’s University, Professor Emeritus at the University of Tokyo (Former chair of

at MIT Sloan and University Professor Emeritus at Harvard University

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 Emeritus at Waseda University (Former chair of Investment Advisory Committee)(Note) For the details of “GPIF Finance Awards,” refer to the website: https://www.gpif.go.jp/en/investment/research/awards/.

76

Investment Results in Fiscal 2021

8 Other Major Initiatives

Research
GPIF believes it necessary to conduct research andstudies (two of which were joint research projects withamass the know-how gained for safely and efficiently

universities and other organizations).

managing and investing pension reserves for the future.
In fiscal 2021, GPIF conducted the following three(Note) For the details of researches, refer to the website: https://www.gpif.
go.jp/en/investment/research/.

A. Research on ESG and SDGs considerations in investment
GPIF has promoted ESG (Environment, Social,

Given the above circumstances, GPIF believes

and Governance) factors – non-financial factors

it is necessary to continuously conduct researches– incorporated investments with a thought that

relating to ESG, etc. Therefore, GPIF has exploreda sustainable growth of investees and the entire

the mechanisms by which these ESG and SDGs

market is essential to achieve long-term expansion ofincorporated investment methods can be effective,

investment return for the pension reserve investment

through conducting researches including the project

management.

titled “Research on diversification effectiveness andOn the other hand, the fields connected withportfolio efficiency of ESG investment” (described insustainability concept including ESG and SDGs

detail later in this section). In addition, considering

have recently extended beyond the conventionalthat it is important to comprehend a whole picture offields including economics, finance, and financial

a wide range of sustainability-related fields including

engineering to incorporate a wide range of research

ESG and SDGs, GPIF plans to conduct an overhead

fields such as environmental economics, climate

research (a comprehensive literature review) to

science, and urban engineering. By utilizing

identify trends in existing research and future researchtechnology in informatics, attempts to quantify non-directions in a wide range of sustainability-related

financial information, which was previously difficult tofields.

quantify, are now being actively pursued as well.
B. Survey for corporate values in the post-COVID-19 world
With SDGs becoming widespread and interest in ESG

to a questionnaire survey conducted as part ofgrowing, the criteria for evaluating companies andthe project.

the way companies think about their stakeholders

wide range of organizations and individuals (“entities”):

and the environment) have been changing dramatically,business companies, institutional investors, andand it is believed that the trend away from shareholder

individual investors. The results of the survey showed

capitalism toward an emphasis on “stakeholder value”

a conspicuous trend among all entities to respond(the value of shareholders, customers, employees,that “employees and customers have become more

suppliers, society, and the environment), which takes

important during the COVID-19 pandemic and thevarious stakeholders into account, will become evenenvironment will become the most important in threestronger. At the same time, companies are struggling toyears’ time.” The results also revealed that businessclearly explain to their various stakeholders the validity

companies tended more than institutional investorsof increasing corporate earnings through enhancing

to respond that “our stakeholder-oriented efforts are

stakeholder value.

not adequately reflected in our share price.” These

Kyoto University conducted the research projectnew findings were obtained on the degree to which

titled “Survey for corporate values in the post-COVID-19

the importance of each stakeholder class differs by

world” on the search for corporate value in a post-

entity and the degree to which the perception of thepandemic society with the aim of clarifying the gap

relationship between stakeholder value and its reflection

between “society’s assessment of corporations” andinto share prices differs.

“the circumstances in which corporations themselves

Joint research entity: Kyoto University

find themselves,” as well as the state of corporate value
in consideration of stakeholder value. GPIF contributed

77

This questionnaire survey was conducted on a(shareholders, customers, employees, suppliers, society,Investment Results in Fiscal 2021

8 Other Major Initiatives

C. Research on diversification effectiveness and portfolio efficiency of ESG investment
As a universal owner and cross-generational investor,changes in market conditions by setting up a model able

GPIF pursues ESG (Environmental, Social andto reflect market conditions.
Among the objective assessments of thenegative impacts of environmental and social issues andeffectiveness of ESG investment, obtained by theseto improve the long-term return of the overall assets

analyses, were that the inclusion of ESG indexes may

under management. In doing so, GPIF believes that

reduce risk and correlation, and thus increase portfolio

to verify the effects of ESG investment on portfolio

efficiency; that the WIN index may outperform its parent

diversification and portfolio efficiency will enable us toindex under certain market conditions; that, as thetake more appropriate and effective ESG initiatives. GPIF

number of PRI signatures increases, the more a higher

also believes it is necessary to objectively evaluate the

ESG score tends to be associated with higher corporate

effectiveness of ESG investment. To verify these aspects,

value; and that a high ESG rating reduces a company’s

GPIF conducted a quantitative analysis incorporating

credit spread with a statistical significance.

perspectives on over time transition and differences

Joint research entity: Crawford School of Public Policy,

across countries. We also analyzed the impact of

The Australian National University

Chapter 1

Governance) investments with an aim to reduce the(Note 1) In addition to these research projects, a Request for Information (RFI) relating to information on “the mechanisms that have created and entrenched theworldwide low interest rate environment” was implemented by GPIF in fiscal 2021 and, the information received through the RFI was compiled to an article
entitled “The Mechanisms Entrenching Low Interest Rates in Japan, the U.S., and Europe,” which was published in the November issue of the Securities
Analysts Journal.
(Note 2) GPIF Working Papers featuring GPIF’s operations and policies with the underlying thoughts, which are simply explained by GPIF executives and employeeswith charts and graphs, are also available for the public. For details, please refer to the website https://www.gpif.go.jp/en/investment/research/workingpaper.html.

78

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 support, whereby pension premiums

be improved (Note).

collected from working generations support elderly

There are three laws relevant to investment of pension

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 funds,

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

aside from a payment reserve. However, to respond to

managed safely and efficiently from a long-term perspective

changes in the population and economy appropriately, andsolely for the pension beneficiaries” (Employees’ Pension

to prepare for further declining birthrate and aging population

Insurance Act and National Pension Act) and “the pension

expected in the future, GPIF still holds certain amount ofreserve shall be managed safely and efficiently” (Act on thereserve funds in the public pension scheme, while being

Government Pension Investment Fund). Accordingly, themanaged under a pay-as-you-go system. It is stipulated

most fundamental legal requirement for management ofthat “the portion of pension premiums not allocated tothe pension reserve is “safe and efficient management ofbenefits will be invested as reserve funds to stabilize pension

pension reserve from a long-term perspective.”finance.”
Japan’s declining 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.

79

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 part of pension benefits initially. In

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

addition to investment returns, the accumulated funda sufficient reserve fund necessary for the payment

will be gradually withdrawn, after a set period of time.

of pension benefits, and therefore short-term market

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.

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]
Current
recipient
generation[Scenario I]
Peak: FY2095 (¥1,008 trillion)

Pensionbenefits

Pension premiums
Contributions
Current
working
generation[Scenario II]
Peak: FY2088 (¥693 trillion)

Pensionbenefits[Scenario III] Peak: FY2079

Pension premiums¥479 trillion

Contributions[Scenario III]

Futureworking
generation

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 33.

80

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

the pension reserve fund, 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 fund 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 theobjectives 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 longterm perspective, based on the philosophy of diversified
investment. It is regarded that GPIF should take into
consideration the reference portfolio jointly established by
GPIF, the Federation of National Public Service Personnel
Mutual Aid Associations, the Pension Fund Association

In addition to the formulation and publication of the
Policy for Investment Management (Operation Policy), theMedium-term Plan requires GPIF to review the Operation
Policy in a timely and proper manner in light of changes
in the economic environment and revise it promptly as
required.

Investment objectives, risk management, ensuring transparency and others

81

In the fourth Medium-term Objectives for the period fromand manage and control risks of the overall portfolio, eachfiscal 2020 to fiscal 2024 stipulate that the pension

asset class, each asset manager, and each custodian.

reserve must achieve a long-term real return (netThe fourth Medium-term Objectives stipulates thatinvestment yield on the pension reserve fund less the

GPIF shall combine passive and active investments,

nominal wage growth rate) of 1.7% with minimal risks

implement active investment based on the strong

based on the financial verification. The fourth Medium-conviction of the excess return, taking historicalterm Objectives also require GPIF to make efforts toperformance into account, and GPIF shall follow thepay close attention not to affect market pricing orconcept that the sustainability of investee companies

investment activities by private sectors, and to achieve theand the overall markets will be critical for the expansion

benchmark rate of return (market average rate of return)of long-term investment returns in the management offor the total portfolio and each asset class during thepension reserves. Based on this, GPIF shall manage theperiod for the Medium-term Objectives.

pension reserve while paying attention to the Operation

Regarding risk management for the pension reserve, it

Policy mentioning that the pension reserve shall be

stipulates that GPIF shall maintain the diversified portfolio,

managed and invested for the purpose of securing

Roles and Organizational Operation of Government Pension Investment Fund

1 GPIF’s Roles in the Public Pension Scheme

long-term returns for the pension beneficiaries, andtargets, among others, shall be resolved upon theimplement necessary initiatives by individually examining

deliberation of the Board of Governors.

the promotion of investments that consider ESG

An outline of the deliberations at the Board of(environmental, social, and governance) as non-financial

Governors is promptly published upon obtaining approvalfactors.

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 savings82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 of 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 four 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)83

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

framework for the policy asset mix, and others. The

fields, such as economics, finance, asset management,

Board also received reports from the President or otherand business administration, discuss a broad range of

executives on the asset allocation ratio and the status

agenda items related to GPIF’s investment and operationof portfolio risk management for active discussion. The

management from a multidimensional perspective anddetails of discussion by the Board of Governors are

make timely and appropriate decision-making. The Board

published later on the GPIF website of as a summary ofof Governors held a total of 13 meetings in fiscal 2021. An

agenda items.

outline of the meetings is as described in the following table.
In fiscal 2021, the Board of Governors passed
a resolution for measures for benchmarks, outlining

Outline of meetings of the Board of Governors

Date of meeting

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

Chapter 2(fiscal 2021)(Resolution) (i) Revision of statement of operation procedures due to a change in the accounting classi54th meeting April 23, 2021 fication of FILP bonds, (ii) Revision of various rules and regulations due to the elimination of the seal
requirement from GPIF’s internal procedures
55th meeting

May 24, 2021 (Resolution) Revision of Board of Governors Regulations(Deliberation) (i) Annual Report fiscal year 2020 (draft), (ii) Review of operations in fiscal 2020 (draft), (iii)
56th meeting June 11, 2021 Preparation of the financial statements, business report, and financial report for fiscal 2020, appropriation of profit and loss and other important matters related to accounting (draft)(Resolution) Annual Report fiscal year 2020 (draft), (ii) Disclosure of portfolio holdings by asset category
as of the end of March 2021, (iii) Review of operations in fiscal 2020 (draft), (iv) Preparation of the finan57th meeting June 28, 2021
cial statements, business report, and financial report for fiscal 2020, appropriation of profit and loss andother important matters related to accounting (draft)
58th meeting

July 26, 2021 (Deliberation) Measures for benchmarks

59th meeting

September 22,(Resolution ) Measures for benchmarks
2021

60th meeting

October 21,
2021

61st meeting

November 12,—
2021

62nd meeting

December 21,(Deliberation) Framework for the policy asset mix verification(draft)
2021

63rd meeting

January 13,2022—

64th meeting

February 17,
2022(Resolution) Framework for the policy asset mix verification(draft)

65th meeting

March 10,2022

(Resolution) (i) Revision of Regulation for Salaries of Employees (wage proper matrix for the highly
skilled professionals), (ii) Revision of Regulation for Information Security Management(Deliberation) Annual Plan for fiscal 2022 (draft)

66th meeting

March 30,
2022

(Resolution) (i) Consent to the appointment of the Executive Managing Director (Management andInvestment Operations) and the Executive Managing Director (Planning and General Affairs), (ii)Revisionof the Board of Governors regulations—

84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 14 meetings in fiscal 2021.

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, 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 website.

including the Investment Committee, the Portfolio Risk

[4] Execution system
Organization
As of April 1, 2022, 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 154 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, the Legal

Affairs Division, Accounting Division), the Planning

Department, and the Internal Audit Department (the lastand Communication Department (Planning and

two Departments report directly to the President).

Communication Division), the Research and Actuary

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

Organization chart (as of April 1, 2022)
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

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

Internal control system
GPIF has put an internal control system in place inup and promoting measures necessary to be constantly

accordance with the Basic Policies of Internal Control

aware of risk factors, prevent risks, and minimize losses

established by the Board of Governors.

in the event of risk occurrence.

Specifically, regarding the system to ensure that theexecution of duties by the President, Executive

rules and regulations relating to operational and other

Managing Directors, and staff members comply withrisk management were established, including the rules

laws and regulations, the Internal Control Committee isfor operational and other risk management establishedestablished to promote internal control. In addition, theby the Board of Governors held in July 2019. Based onCompliance Committee is established under the Internal

the new operational and other risk management process

Control Committee to ensure compliance with laws andset forth by the above new rules and regulations, GPIF

regulations as well as fiduciary responsibility, etc., andgoes through a potential risk identification, analysis, andthe Compliance Officer is appointed. All executives andassessment process on an annual basis. In addition,

staff members are informed of the necessity to comply

these rules and regulations stipulate that eachwith the Investment Principles and the Code of Conduct

department or office is required to promptly takeand act as an organization worthy of the trust of theappropriate measures to deal with any risks that occur,

public. A whistle-blowing system is also in place, andand to report on an identified risk to the department

corrective actions and preventive measures shall be

responsible for supervising operational and other risktaken according to our internal rules whenever an illegal

management and Internal Audit Department for eachor inappropriate activity is (or is expected to be)time of risk occurrence. The operational and other risk

perpetrated by executives or staff members of GPIF. In

management execution status of GPIF is reported to theaddition, the Internal Audit Department is established to

Board of Governors once a year. In addition, theconduct internal auditing of GPIF’s operations andoccurrence of a significant operational and other risk is torelated responsibilities.

be promptly reported to the Board of Governors.

GPIF’s fourth Medium-term Plan provides for theSpecifically, regarding the system to ensure theexpansion and strengthening of GPIF’s legal function. To

efficiency of the execution of duties, the Investment

address this requirement, on March 1, 2021, GPIF

Committee has been established to carry out priorestablished the Legal Department. With thedeliberation to make decisions on important mattersestablishment of the Legal Department, GPIF has

related to the execution of management operations, andbecome able to better manage its highly individualized

holds careful discussions from a multidimensional

alternative investments in a timely manner, further

perspective under the supervision of the CIO.

strengthen internal control and ensure stricter
compliance with applicable laws and regulations.
Regarding the management of the risk of losses of87

With regard to operational and other risk, the new

In addition to the above, the Information Security
Committee promotes GPIF’s information security
measures, the Management and Planning Committee

other related systems, the Portfolio Risk Management

carries out prior deliberation to make decisions on

Committee has been established to appropriately

important matters related to execution of GPIF’s

monitor and handle various risks (portfolio risks) caused

operations, and the Procurement Committee ensures theduring the pension management. The Internal Control

proper state of procurement and subcontracting

Committee has been established to identify, analyze, andprocesses (excluding contracts with external asset

assess operational risks (include reputation risks) thatmanagers), and the Contract Monitoring Committee

could impede GPIF’s day-to-day operations as well as toincluding external experts conducts procurement-related

take measures against those risks. The Internal Control

inspections. By these committees, GPIF is committed toCommittee also conducts risk management by drawing

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)(Note 1) 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.
(Note 2) The Executive Managing Director (Management and Investment Operations)/CIO is responsible for matters related to the Investment
Strategy Department, the Investment Administration Department, the Public Market Investment Department, the Private Market
Investment Department, and the Internal Fixed Income Investment Department.

88Chapter 3 Reference Data
1

Investment Assets by Investment Method and by Manager, Etc.

[1] Investment assets by investment method and by asset class (the market value at the end of fiscal 2021)
Market value (¥billion)

Portfolio allocation (%)

Total (Investment assets)

196,592.6

100.00

Passive investments

167,524.5

85.21

Active investments

28,284.9

14.39

783.2

0.40

OthersMarket value (¥billion)

196,592.6

100.00Total

47,630.6

24.23

Passive investments

36,484.3

18.56

Active investments

10,412.7

5.30

Others

733.7

0.37

Total

48,678.4

24.76

Passive investments

38,565.0

19.62

Active investments

10,063.9

5.12

Others

49.5

0.03

Total

49,513.7

25.19

Passive investments

46,368.0

23.59

Active investments

3,145.6

1.60

Total

50,770.0

25.82

Passive investments

46,107.3

23.45

Active investments

4,662.7

2.37

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) refer to yen-denominated short-term assets. Foreign bonds (others) refer toforeign currency-denominated short-term assets.

[2] Changes in the ratios of passive and active investment(Unit: %)FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

Domestic
bonds

Passive

90.48

90.13

86.10

82.50

79.38

77.03

75.54

71.45

72.93

76.60

Active

9.52

9.87

13.90

17.50

20.62

22.97

24.46

28.55

27.07

23.40

Foreignbonds

Passive

70.60

71.70

69.85

64.94

60.89

61.98

66.24

73.81

76.12

79.22

Active

29.40

28.30

30.15

35.06

39.11

38.02

33.76

26.19

23.88

20.78

Domestic
equities

Passive

78.78

87.69

86.71

81.52

90.62

90.44

90.58

90.93

92.97

93.65

Active

21.22

12.31

13.29

18.48

9.38

9.56

9.42

9.07

7.03

6.35

Passive

86.74

89.37

88.05

84.15

86.45

86.32

90.50

90.17

87.99

90.82

Foreignequities
Total

Active

13.26

10.63

11.95

15.85

13.55

13.68

9.50

9.83

12.01

9.18

Passive

84.50

86.00

83.91

79.28

77.31

76.28

77.87

79.21

82.69

85.21

Active

15.50

14.00

16.09

20.72

22.69

23.72

22.13

20.79

17.31

14.79

(Note 1) The amount until fiscal 2019 does not include short-term assets and FILP bonds. There are no FILP bonds outstanding since fiscal 2020.
(Note 2) The amount of domestic bonds (active) and total (active) since fiscal 2020 includes yen-denominated short-term assets. The amount of foreign bonds (active)
and total (active) since fiscal 2020 includes foreign currency denominated short-term assets.
(Note 3) JPY hedged foreign bonds are classified as foreign bonds (passive) until fiscal 2019 and as domestic bonds (passive) since fiscal 2020.

89

[3] Investment assets by manager, etc. (the market value at the end of fiscal 2021)(Unit: ¥billion)
Investment
methodAsset manager name(Subcontractor, etc.)
Asset Management One Co., Ltd.Ⅰ

BPI

1,134.5

MTBJ

USMBS-H

596.7

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

MTBJ

BPI

1,269.9

BlackRock Japan Co., Ltd.ⅠMTBJUSGOV-H

524.2

BlackRock Japan Co., Ltd. Ⅱ

MTBJ

EGBI-H

23.7

MTBJ

USMBS-H

612.1

MTBJ

BPI

1,270.4(Unit: ¥billion)
Investment
methodAsset manager name(Subcontractor, etc.)
Asset Management One Co., Ltd. Ⅴ(former Mizuho Asset Management)(Loomis, Sayles & Company, L.P.)

Ashmore Japan Co., Ltd

G-AGG-EXC

320.8

Schroder Investment Management(Japan) LimitedⅠ

SSTB

G-AGG-EXC

604.7(Schroder Investment Management Limited, etc.)

Sompo Asset Management Co., LTD.

SSTB

G-AGG-EXC

845.7

T.Rowe Price Japan, Inc.

MTBJEUROHY2%

61.4

PineBridge Investments Japan Co., Ltd.

MTBJ

USHY2%

63.0

BNY Mellon Investment Management
Japan LimitedⅠ

SSTB

EUROAGG

623.5

PGIM Japan Co., Ltd. Ⅱ

SSTB

G-AGG-EXC

1,069.8

SSTB

G-AGG-EXC

986.5

FIL Investments (Japan) LimitedⅠ

SSTB

USAGG

899.7

BlackRock Japan Co., Ltd.  (Black-

SSTB

G-AGG-EXC

536.9

SSTB

G-AGG-EXC

719.7

Barings Japan Limited

MTBJ

USHY2%

64.8

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

SSTB

G-AGG-EXC

930.8

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

MTBJ

USHY2%

61.7

UBS Asset Management (Japan) LtdⅠSSTBEUROHY2%

96.0(Colchester Global Investors Limited)SSTB

USGOV-H

527.9

SSTB

EGBI-H

22.6

In-house investmentⅠ

MTBJ

BPI

8,949.0In-house investment Ⅱ

MTBJ

BPI-G

9,160.4

Asset Management One Co., Ltd. Ⅱ

MTBJ

BPI

1,082.1

Asset Management One Co., Ltd. Ⅲ

MTBJ

BPI

933.7

Amundi Japan Ltd

MTBJ

BPI

246.1

MU Investments Co., Ltd.

MTBJ

BPI

691.3

Rock Financial Management, Inc., etc.)

Tokio Marine Asset Management Co.,
Ltd.

MTBJ

BPI

922.7

Franklin Templeton Japan Co., Ltd.

Nikko Asset Management Co., Ltd.Ⅰ

MTBJ

BPI

246.9

Nissay Asset Management Corporation

MTBJ

BPI

246.8

Nomura Asset Management Co., Ltd.Ⅰ

MTBJ

BPI

246.3

PGIM Japan Co., Ltd.Ⅰ

MTBJ

BPI

628.7

MTBJ

BPI

538.8

Manulife Investment Management(Japan) LimitedⅠ

709.3

SSTB

Resona Asset Management Co., Ltd. Ⅱ(Pacific Investment Management Company
LLC (PIMCO), etc.)

G-AGG-EXC(Goldman Sachs Asset Management, L.P., etc.)

Resona Asset Management Co., Ltd.Ⅰ

PIMCO Japan LtdⅠ

SSTB

225.8

MTBJ

(former Mizuho Trust & Banking)Marketvalue

GBI-EMGD-EXC

Mitsubishi UFJ Trust and Banking
CorporationⅠBPI-GManagerbenchmark

SSTB

MTBJ

BPI-G

Custodians

Goldman Sachs Asset Management
Co., Ltd.

(Ashmore Investment Management Limited)

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ(former DIAM)

6,256.1(T.Rowe Price International Ltd.)6,136.8(PineBridge Investments LLC)

Foreign bonds
activeinvestment(Insight Investment Management (Global) Limited)(PGIM, Inc. etc.)

PIMCO Japan Ltd Ⅱ(Pacific Investment Management Company
LLC (PIMCO), etc.)(Fidelity Institutional Asset Management (FIAM))(Brandywine Global Investment Management, LLC.)(Barings LLC, etc.)(Morgan Stanley Investment Management Inc., etc.)(Morgan Stanley Investment Management Inc.)

MTBJ

BPI

427.3

(UBS Asset Management (UK) Ltd)

Foreign bondsothers

MTBJ

BPI

246.6

In-house investment Ⅴ

SSTB

—

49.5

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

MTBJ

BPI

688.3

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

MTBJ

TOPIX

8,432.5

Mitsubishi UFJ Trust and Banking
Corporation Ⅱ

MTBJ

BPI

929.3

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

MTBJ

RN-P

2,072.6In-house investment Ⅲ

MTBJ

—

2,094.8

Asset Management One Co., Ltd. Ⅷ

MTBJ

FTSE-BL

983.0

In-house investment Ⅳ

CBJ

—

733.7

Nomura Asset Management Co., Ltd. Ⅲ

MTBJ

MSCI-IR

143.5

Asset Management One Co., Ltd. Ⅳ

Nomura Asset Management Co., Ltd. Ⅳ

MTBJ

RAFI

1,422.3

SSTB

WGBI-EXC

3,508.0

FIL Investments (Japan) Limited Ⅱ

MTBJ

TOPIX

231.5

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

WGBI-EXC

2,446.6

BlackRock Japan Co., Ltd. 

MTBJ

TOPIX

5,608.2

Nomura Asset Management Co., Ltd. Ⅱ

MTBJ

WGBI-EXC

3,141.9

BlackRock Japan Co., Ltd. 

MTBJ

FTSE-BLSR

800.0

BlackRock Japan Co., Ltd. Ⅳ

MTBJ

WGBI-EXC

4,975.4

MTBJ

TOPIX

7,895.9

BlackRock Japan Co., Ltd. Ⅴ

MTBJ

WGBI-OEXC

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ

1,304.9

SP-C

1,567.8

MTBJ

USGOV

3,255.6

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅵ

MTBJBlackRock Japan Co., Ltd. Ⅵ
BlackRock Japan Co., Ltd. Ⅶ

USGOV
1-3Y

MTBJ

TOPIX

5,962.8

MTBJ

0.1

Mitsubishi UFJ Trust and Banking
Corporation Ⅲ

EGBI

3,345.1

Mitsubishi UFJ Trust and Banking
Corporation Ⅳ

MTBJ

MSCI-ESG

2,099.0

Mitsubishi UFJ Trust and Banking
Corporation Ⅴ

MTBJ

MSCI-WIN

1,245.7

Resona Asset Management Co., Ltd. Ⅷ

MTBJ

TOPIX

7,897.5
229.1

BlackRock Japan Co., Ltd. Ⅷ

MTBJ(Geode Capital Management, LLC)

Domestic
equities
passiveinvestment

BlackRock Japan Co., Ltd. Ⅸ

MTBJ

USIG

9.8

BlackRock Japan Co., Ltd. Ⅹ

MTBJ

EUROIG

99.1

BlackRock Japan Co., Ltd. Ⅺ (Black-

MTBJ

USHY2%

26.7

Asset Management One Co., Ltd. Ⅸ

MTBJ

TOPIX

BlackRock Japan Co., Ltd. Ⅻ (Black-

MTBJ

EUROHY2%

31.5

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

MTBJ

RN-SG

116.0

Invesco Asset Management (Japan)
LimitedⅠ

MTBJ

TOPIX

288.1

Invesco Asset Management (Japan)
Limited Ⅱ

MTBJ

TOPIX

141.5

Rock Financial Management, Inc., etc.)

Rock Financial Management, Inc., etc.)

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ

SSTB

WGBI-EXC

4,583.5

Resona Asset Management Co., Ltd. Ⅲ

SSTB

WGBI-EXC

4,848.9

Resona Asset Management Co., Ltd. Ⅳ

SSTB

WGBI-OEXC

764.9

Resona Asset Management Co., Ltd. Ⅴ

SSTB

USGOV

2,977.0

Resona Asset Management Co., Ltd. Ⅶ

SSTB

EGBI

3,246.0

Domestic
equities active
investment

Capital International K.K.

MTBJ

TOPIX

619.3

Schroder Investment Management(Japan) Limited Ⅱ

MTBJ

TOPIX

361.9

Nomura Asset Management Co., Ltd. Ⅴ

MTBJ

RN-S

110.6

(Capital International, Inc.)

Chapter 3

Sumitomo Mitsui DS Asset Management Company, LimitedⅠ(former Mizuho Trust & Banking)Foreign bonds
passiveinvestment

Marketvalue

MTBJ

BlackRock Japan Co., Ltd. Ⅲ
Domestic(BlackRock Financial Management, Inc.)bonds passive Sumitomo Mitsui Trust Asset Manageinvestment
ment Co., Ltd.Ⅰ

Domestic
bonds others

ManagerbenchmarkAllianceBernstein Japan Ltd.Ⅰ(AllianceBernstein L.P., etc.)(former Mizuho Trust & Banking)Domestic
bonds active
investment

Custodians90Reference Data

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

(Unit: ¥billion)(Unit: ¥billion)
Investment
methodDomestic
equities active
investment

Asset manager name(Subcontractor, etc.)

Custodians

ManagerbenchmarkFIL Investments (Japan) Limited Ⅲ

MTBJ

TOPIX

498.9

Sumitomo Mitsui DS Asset Management Company, Limited Ⅱ

MTBJ

RN-V

356.3

CustodyLazard Japan Asset Management K.K.Ⅰ

MTBJ

TOPIX

143.7

Russell Investments Japan Co., Ltd.Ⅰ

Total

MTBJ

TOPIX

231.2

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

MSCI-AEXC

10,228.0

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

MTBJ

MSCI-N

1,920.0

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

MTBJ

MSCI-EU

356.5

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

96.9(Russell Investments Implementation Services, LLC.)

Foreignequities
passiveinvestment

Marketvalue

MTBJ

MSCI-P

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

MTBJ

MSCI-EXC

955.3

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

MTBJ

SP-GC

3,390.6

BlackRock Japan Co., Ltd. XVI

MTBJ

MSCI-AEXC

8,517.9

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ

MTBJ

MSCI-AEXC

8,667.5

Legal & General Investment Management Japan KKⅠMTBJMSCI-AEXC

7,846.9

Legal & General Investment Management Japan KK ⅡMTBJMSCI-N

1,548.5(Legal & General Investment Management Limited)

Investment
methodMSCI-EU

372.3

Legal & General Investment Management Japan KK Ⅳ

MTBJMSCI-P

110.3(Legal & General Investment Management Limited)

Legal & General Investment Management Japan KK Ⅴ

MTBJ(Legal & General Investment Management Limited)Manager benchmark

Source of benchmark

BPI

NOMURA-BPI (excluding ABS)

Nomura Research Institute, Ltd.

BPI-GNOMURA-BPI Government 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 US MBS Fixed Rate Index (JPY hedged/JPY basis) Bloomberg Index Services Limited

USGOVFTSE US Government Bond Index (no hedge/JPY basis)

MTBJ

MO-GD

419.5

FTSE Fixed Income LLC

FTSE Fixed Income LLCUSGOV 1-3Y FTSE US Government Bond Index 1-3years (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 Global Aggregate Index(not incl. JPY, CNY, no hedge/JPY basis)

Bloomberg Index
Services Limited

USAGG

Bloomberg US Aggregate Index(no hedge/JPY basis)

Bloomberg Index
Services Limited

EUROAGG

Bloomberg EURO Aggregate Index(no hedge/JPY basis)

Bloomberg Index
Services Limited

USIG

Bloomberg US Corporate Bond Index(no hedge/JPY basis)

Bloomberg Index
Services Limited

EUROIG

Bloomberg EURO Corporate Bond Index(no hedge/JPY basis)

Bloomberg Index
Services Limited

USHY2%

Bloomberg US Corporate High Yield 2% Issuer
Capped Bond Index (no hedge/JPY basis)

Bloomberg Index
Services Limited

MTBJ

MSCI-E

127.1

MTBJ

MSCI-K

777.5

Nikko Asset Management Co., Ltd. Ⅱ

MTBJ

MSCI-K

931.6

BNY Mellon Asset Management Japan
Limited Ⅱ

MTBJMSCI-K

627.6

Mitsubishi UFJ Trust and Banking
Corporation Ⅵ

MTBJ

MSCI-A

706.0

UBS Asset Management (Japan) Ltd ⅡMTBJMSCI-K

787.9

Lazard Japan Asset Management K.K. Ⅱ

MTBJ

MSCI-E

77.1

DBJ Asset Management Co., Ltd.

SSTB

—

109.2

Foreign bonds(Legal & General Investment Management Limited)

Asset Management One Co., Ltd. Ⅺ(Walter Scott & Partners Limited)

EUROHY Bloomberg EURO Corporate High Yield 2% Issuer
2%
Capped Bond Index (no hedge/JPY basis)(Baillie Gifford Overseas Limited)(UBS Asset Management (UK) Ltd)
(Lazard Asset Management LLC)

SSTB

—

262.1

Fund of Funds Manager : Pantheon

Gatekeeper : Nomura Asset Management Co., Ltd. Ⅶ

SSTB

—

21.8

Fund of Funds Manager : Pantheon

Gatekeeper : Sumitomo Mitsui DS AssetManagement Company, Limited Ⅲ

SSTB

—

399.2

Fund of Funds Manager: StepStone Infrastructure & Real Assets

SSTB

—

100.0

In-house investment Ⅵ

SSTB

—

186.4

Gatekeeper : Neuberger Berman East
Asia Limited

SSTB

—

164.2

Gatekeeper : Mitsubishi UFJ Trust andBanking Corporation Ⅶ

SSTB

—

105.9

Fund of Funds Manager: StepStone Infrastructure & Real Assets(Unit Trust Manager : Nissay Asset Management Corporation)

Fund of Funds Manager : NB Alternatives Advisers LLC

Fund of Funds Manager: Hamilton Lane Advisors, L.L.C.

In-house investment Ⅶ

SSTB

Gatekeeper : Asset Management One
Co., Ltd. Ⅻ

SSTB

Gatekeeper : Asset Management One
Co., Ltd. XIII

SSTB

—
—

36.5
556.4

37 asset managers, 123 Funds

Tokyo Stock Exchange, Inc.

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-IRMSCI 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

FTSE International Limited

SSTB

—

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, after
MSCI G.K.
taking into account GPIF dividend tax factors)

MSCI-AEXCMSCI 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 Pacific (not incl. JPY, JPY basis, incl. dividends,
after taking into account GPIF dividend tax factors)

MSCI G.K.

MSCI-EMSCI EMERGING MARKETS (JPY basis, incl.
dividends, after deducting taxes)

MSCI G.K.

208.7

MSCI-EXCMSCI EMERGING MARKETS (not incl. China A, JPY
basis, incl. dividends, after deducting taxes)

MSCI G.K.

196,581.2

MSCI-AESGMSCI ACWI ESG Universal Index (not incl. China A,
MSCI G.K.
JPY basis, incl. dividends, after deducting taxes)

MO-GD

Morningstar Developed Markets (ex Japan) Gender Diversity Index
Morningstar, Inc.
(JPY basis, incl. dividends, after deducting taxes)

SP-GC

S&P Global Ex-Japan LargeMidCap Carbon Efficient Index S&P Opco, LLC

8.0

Fund of Funds Manager : CBRE Global Investment Partners Limited

Mitsubishi UFJ Trust and Banking
Corporation Ⅷ

TOPIX (incl. dividends)

RN-P

MSCI-P

Fund of Funds Manager : CBRE Global Investment Partners Limited—

Foreign equities(Unit Trust Manager : Nissay Asset Management Corporation)

TOPIX

FTSE-BLSR FTSE Blossom Japan Sector Relative Index

Gatekeeper : Sumitomo Mitsui DS AssetManagement Company, Limited Ⅳ

Bloomberg Index
Services Limited

GBI-EMGD- J.P. Morgan Government Bond Index-Emerging Markets Global Diversified Index J.P.Morgan
EXC(not incl. China, no hedge/JPY basis)
Securities LLC

Domestic equities

Gatekeeper : Nomura Asset Management Co., Ltd. Ⅵ

91

162,145.0
196,581.3

FTSE World Government Bond Index
FTSE Fixed Income LLC(not incl. JPY, USD, EMU, CNY, no hedge/JPY basis)

Legal & General Investment Management Japan KK Ⅶ

(INTECH Investment Management LLC)

Total

MTBJ

WGBI-OEXC

1,618.7(Massachusetts Financial Services Company)

Alternative
real estate

The Master Trust Bank of Japan, Ltd.

33,702.6
733.7

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

MSCI-AESG

MFS Investment Management K.K.

Alternative
private equity

CBJ

WGBI-EXC

MTBJ(former Mizuho Asset Management) (Allspring Global Investments,LLC.)

Alternative
infrastructure

SSTB

Custody Bank of Japan, Ltd.

58.0

Legal & General Investment Management Japan KK Ⅵ

(Legal & General Investment Management Limited)

Foreignequities active
investment

MSCI-EXC

Domestic bonds

MTBJ(Legal & General Investment Management Limited)

State Street Trust and Banking Co., Ltd.

(Note 1) While the 37 asset managers in the total column do not include inhouse investment, the 123 funds in the total column include seven inhouse investment funds.
(Note 2) The figure in the total market value column for funds managed byasset managers (123 funds managed by 37 asset managers) does notinclude accrued dividend income from closed funds (statutory trust
accounts).
(Note 3) Figures in the market value column for custodians do not include
accrued dividend income (domestic equities: ¥11.3 billion) from closed
funds (statutory trust accounts).
(Note 4) Stock index futures funds are not shown because their market capitalization at the end of the fiscal year was ¥0.0 billion. The amount ofrevenue from stock index futures trading is treated as a figure forreference only, as it was offset by the lost earnings and losses of thecorresponding funds, but revenue from stock index futures trading infiscal 2021 amounted to ¥4.3 billion.
(Note 5) Manager benchmarks are shown in the following table and the sourcesof those benchmarks are as listed in the right-hand column of thefollowing table.

(Legal & General Investment Management Limited)

Legal & General Investment Management Japan KK Ⅲ

Marketvalue

Custodian, etc. name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 1 to M arch 2 0 2 2 )Investment
methodDomestic
bonds
passiveinvestment

Domestic
bonds active
investment

Foreignbonds active
investment

Domestic
equities
passiveinvestment

Asset Management One Co., Ltd.Ⅰ(former Mizuho Trust & Banking)AllianceBernstein Japan Ltd.Ⅰ
State Street Global Advisors (Japan) Co., Ltd.Ⅰ
BlackRock Japan Co., Ltd.Ⅰ
BlackRock Japan Co., Ltd. Ⅱ
BlackRock Japan Co., Ltd. Ⅲ
Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ
Mitsubishi UFJ Trust and Banking CorporationⅠ
Resona Asset Management Co., Ltd.Ⅰ
Resona Asset Management Co., Ltd. Ⅱ
In-house investmentⅠ
In-house investment Ⅱ
Asset Management One Co., Ltd. Ⅱ(former DIAM)
Asset Management One Co., Ltd. Ⅲ (former Mizuho Trust & Banking)Amundi Japan Ltd
MU Investments Co., Ltd.
Tokio Marine Asset Management Co., Ltd.
Nikko Asset Management Co., Ltd.Ⅰ
Nissay Asset Management Corporation
Nomura Asset Management Co., Ltd.Ⅰ
PGIM Japan Co., Ltd.Ⅰ
PIMCO Japan LtdⅠ
Manulife Investment Management (Japan) LimitedⅠ
Sumitomo Mitsui DS Asset Management Company, LimitedⅠ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ
Mitsubishi UFJ Trust and Banking Corporation Ⅱ
In-house investment Ⅲ
Asset Management One Co., Ltd. Ⅳ (former Mizuho Trust & Banking)State Street Global Advisors (Japan) Co., Ltd. Ⅱ
Nomura Asset Management Co., Ltd. Ⅱ
BlackRock Japan Co., Ltd. Ⅳ
BlackRock Japan Co., Ltd. Ⅴ
BlackRock Japan Co., Ltd. Ⅵ
BlackRock Japan Co., Ltd. ⅧBlackRock Japan Co., Ltd. Ⅸ
BlackRock Japan Co., Ltd. Ⅹ
BlackRock Japan Co., Ltd. Ⅺ
BlackRock Japan Co., Ltd. Ⅻ
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ
Resona Asset Management Co., Ltd. Ⅲ
Resona Asset Management Co., Ltd. Ⅳ
Resona Asset Management Co., Ltd. Ⅴ
Resona Asset Management Co., Ltd. Ⅶ
Asset Management One Co., Ltd. Ⅴ(former Mizuho Asset Management)
Ashmore Japan Co., Ltd
Goldman Sachs Asset Management Co., Ltd.
Schroder Investment Management (Japan) LimitedⅠ
Sompo Asset Management Co., LTD.
T. Rowe Price Japan, Inc.
PineBridge Investments Japan Co., Ltd.
BNY Mellon Investment Management Japan LimitedⅠ
PGIM Japan Co., Ltd. Ⅱ
PIMCO Japan Ltd ⅡFIL Investments (Japan) LimitedⅠ
BlackRock Japan Co., Ltd. XIIIFranklin Templeton Japan Co., Ltd.
Barings Japan Limited
Morgan Stanley Investment Management (Japan) Co., Ltd.Ⅰ
Morgan Stanley Investment Management (Japan) Co., Ltd. Ⅱ
UBS Asset Management (Japan) LtdⅠ
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. Ⅲ
Nomura Asset Management Co., Ltd. Ⅳ
FIL Investments (Japan) Limited Ⅱ
BlackRock Japan Co., Ltd. XIVBlackRock Japan Co., Ltd. XV
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ
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. ⅧTime-weighted return Benchmark return Excess rate of return Remarks(A)(B)(C)＝(A)－(B)column-1.20%-3.01%-1.21%-3.85%-6.24%-3.29%-1.20%-1.33%-1.33%-3.85%-6.15%-1.02%-1.33%-0.92%-0.56%-1.49%-0.81%-1.00%-1.56%-1.80%-1.43%-0.77%-0.64%-0.24%-1.30%-0.96%-0.65%
3.98%
1.97%
1.81%
1.77%
1.82%
1.40%
6.04%
-2.81%-1.66%-0.71%
10.40%
2.03%
1.86%
1.87%
1.44%
6.12%
-2.66%
2.41%-3.43%
1.45%
0.35%
4.19%
2.07%
9.68%
-2.24%-0.03%
3.13%
6.74%
2.96%
4.70%
11.11%
2.57%
10.13%
3.42%-1.22%-5.45%-1.22%-4.01%-6.16%-5.45%-1.22%-1.34%-1.34%-4.01%-6.16%-1.22%-1.34%-1.21%-1.21%-1.52%-0.96%-1.15%-1.81%-2.00%-1.52%-1.21%-1.28%-1.28%-1.52%-1.28%-0.79%
1.88%
1.88%
1.88%
1.88%
1.42%
6.06%
-2.66%-1.40%
0.32%
9.11%
1.46%
1.88%
1.88%
1.42%
6.06%
-2.66%
1.81%-1.68%
2.03%
2.03%
2.03%
1.46%
9.11%
-2.14%
2.03%
2.85%
5.28%
3.14%
2.03%
9.11%
2.06%
9.11%
1.46%

+0.02%+2.45%+0.01%+0.16%−0.09%+2.16%+0.01%+0.01%+0.02%+0.16%+0.01%+0.19%+0.01%+0.29%+0.65%+0.02%+0.15%+0.15%+0.25%+0.20%+0.09%+0.43%+0.64%+1.03%+0.21%+0.31%+0.13%+0.09%-0.07%-0.11%-0.07%-0.03%-0.02%-0.15%-0.26%-1.03%+1.29%+0.57%-0.02%-0.01%+0.02%+0.06%+0.00%+0.60%-1.75%-0.58%-1.69%+2.16%+0.61%+0.57%-0.10%-2.06%+0.28%+1.46%-0.18%+2.67%+2.00%+0.52%+1.02%+1.96%

2.10%
1.91%
5.74%
2.83%
5.22%
1.99%
2.02%
5.38%
1.99%
2.07%
1.99%
3.59%
0.80%
1.92%

1.99%
1.88%
5.72%
3.11%
5.34%
1.99%
1.99%
5.57%
1.99%
2.02%
1.99%
3.64%
0.87%
1.99%

+0.11%+0.03%+0.02%-0.28%-0.12%+0.00%+0.04%-0.19%+0.01%+0.06%+0.00%-0.05%-0.07%-0.07%

〇

〇
〇
〇

〇

〇
〇

Chapter 3

Foreignbonds
passiveinvestment

Asset manager name92

Reference Data

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

Investment
methodDomestic
equities
activeinvestment

Foreignequities
passiveinvestment

Foreignequities
activeinvestment

Asset manager name
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
Nomura Asset Management Co., Ltd. Ⅴ
FIL Investments (Japan) Limited Ⅲ
Sumitomo Mitsui DS Asset Management Company, Limited Ⅱ
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. XVI
Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ
Legal & General Investment Management Japan KKⅠ
Legal & General Investment Management Japan KK Ⅱ
Legal & General Investment Management Japan KK Ⅲ
Legal & General Investment Management Japan KK Ⅳ
Legal & General Investment Management Japan KK Ⅴ
Legal & General Investment Management Japan KK Ⅵ
Legal & General Investment Management Japan KK Ⅶ
Asset Management One Co., Ltd. Ⅺ (former Mizuho Asset Management)
MFS Investment Management K.K.
Nikko Asset Management Co., Ltd. Ⅱ
BNY Mellon Investment 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)column7.82%-9.06%
0.21%
0.77%-0.46%
1.37%-8.69%-4.18%
8.91%
8.51%-4.59%
19.41%
25.23%
14.47%
14.17%-2.65%
20.07%
19.47%
19.61%
19.72%
19.75%
9.87%
9.38%-5.70%
19.72%
22.04%-11.32%
16.81%
19.18%
17.95%-1.85%
14.76%-9.88%

1.99%-8.14%
1.99%
1.99%
1.99%
1.99%
-4.62%
1.99%
10.57%
2.10%
1.99%
19.40%
25.67%
14.19%
14.12%-2.80%
20.13%
19.40%
19.40%
19.40%
20.05%
9.67%
9.35%-5.53%
19.72%
22.13%-2.64%
22.89%
22.89%
22.89%
19.28%
22.89%-2.64%+5.84%-0.93%-1.77%-1.22%-2.45%-0.62%-4.06%-6.17%-1.66%+6.40%-6.58%+0.01%-0.44%+0.27%+0.05%+0.15%-0.06%+0.07%+0.21%+0.32%-0.30%+0.20%+0.03%-0.17%-0.00%-0.10%-8.67%-6.08%-3.71%-4.94%-21.13%-8.13%-7.24%〇〇〇〇

I nve s t m en t p e rf or mance (al ter nat ive ass e t s )Alternative
assetsInvestment style
Global infrastructure
mandate focusing
mainly on opportunities
in Japan (Note 8)

Infrastructure

Private equity

Real estate

Asset manager name

DBJ Asset Management Co., Ltd.

IRR
(local currency)

IRR
(JPY)

Local
currency

Start ofinvestment

3.24%

3.24%

JPY

March 2018

3.36%

8.65%

USD

April 2018

Global-Core

Nomura Asset Management Co., Ltd. Ⅵ

6.99%

12.80%

USD

February 2018

Global-Core

Nomura Asset Management Co., Ltd. Ⅶ

—

—

USD

December 2021

Global-Core

Sumitomo Mitsui DS Asset Management Company, Limited Ⅲ

4.46%

8.90%

USD

January 2018

Global-Core

Sumitomo Mitsui DS Asset Management Company, Limited Ⅳ

—

—

USD

September 2021

Global-CoreIn-house investment Ⅵ

5.77%

6.61%

USD

February 2014

Global-Diversified
Strategy

Neuberger Berman East Asia Limited

15.29%

31.04%

USD

April 2020

Global-Diversified
Strategy

Mitsubishi UFJ Trust and Banking Corporation Ⅶ

13.93%

33.04%

USD

January 2021

Emerging marketsDiversified

In-house investment Ⅶ

7.91%

10.92%

USD

June 2015

Global-Core
Commingled Fund
Investments

Asset Management One Co., Ltd. Ⅻ

10.33%

16.23%

USD

September 2018

Global-Core
JV/Club Type
Investments

Asset Management One Co., Ltd. XIII

—

—

USD

February 2021

Japan-Core

Mitsubishi UFJ Trust and Banking Corporation Ⅷ

7.32%

7.32%

JPY

December 2017

Remarkscolumn〇〇(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 to exchange
rate fluctuations throughout the investment period.
(Note 8) Domestic assets (major investment currency: JPY) are managed separately from foreign assets (major investment currency: USD).
(Note 9) A circle in the remarks column indicates an external asset manager whose investment period is less than one year. The rates of return for external asset
managers with investment periods of less than one year are those for the investment periods. For alternative assets, however, rates of return are shown only
for investments underway for at least one year for which investments in the portfolio companies have already been executed.

93

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)

MTBJ

183,105,119

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

MTBJ

150,377,101

BlackRock Japan Co., Ltd.Ⅰ

MTBJ

48,023,803

BlackRock Japan Co., Ltd. Ⅱ

MTBJ

15,987,706

Sumitomo Mitsui Trust Asset Management Co., Ltd.Ⅰ

MTBJ

264,895,127

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅱ

MTBJ

31,919,934(Unit: ¥)Investment
methodAsset manager name

Custodians Investment fees

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

SSTB

3,454,065,989

Ashmore Japan Co., Ltd

SSTB

1,095,383,569

AllianceBernstein Japan Ltd. Ⅱ

SSTB

377,784,108

Goldman Sachs Asset Management Co.,
Ltd.

SSTB

1,630,359,624

Schroder Investment Management (Japan) LimitedⅠ

SSTB

1,823,265,103

Sompo Asset Management Co., LTD.

SSTB

1,274,248,189

T.Rowe Price Japan, Inc.

MTBJ

314,718,890

Nomura Asset Management Co., Ltd. Ⅷ

SSTB

359,104,299〇

Nomura Asset Management Co., Ltd. Ⅸ

SSTB

225,448,328〇

PineBridge Investments Japan Co., Ltd.

MTBJ

134,277,805

BNY Mellon Investment Management Japan
LimitedⅠ

SSTB

2,867,948,269

PGIM Japan Co., Ltd. Ⅱ

SSTB

2,811,480,288

Mitsubishi UFJ Trust and Banking CorporationⅠ

MTBJResona Asset Management Co., Ltd.Ⅰ

SSTB

63,672,859

Resona Asset Management Co., Ltd. Ⅱ

SSTB

35,204,170

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

MTBJ

1,111,444,858

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

MTBJ

1,031,454,742

PIMCO Japan Ltd Ⅱ

SSTB3,929,043,768

FIL Investments (Japan) LimitedⅠ

SSTB

13,188,304,278

BlackRock Japan Co., Ltd. XIII

SSTB

1,739,257,579

Franklin Templeton Japan Co., Ltd.

SSTB

3,308,302,568

Barings Japan Limited

MTBJ

157,550,418

Manulife Investment Management (Japan)
Limited Ⅱ

SSTB

336,571,771

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

SSTB

3,473,382,011

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

MTBJ

213,334,764

44,500,480

MU Investments Co., Ltd.

MTBJ

472,897,199

Tokio Marine Asset Management Co., Ltd.

MTBJ

537,482,534

PGIM Japan Co., Ltd.Ⅰ

MTBJ

Foreign bonds
activeinvestment

674,363,319

PIMCO Japan LtdⅠMTBJManulife Investment Management (Japan)
LimitedⅠ

MTBJ

1,185,459,088

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅲ

MTBJ

803,115,603

Mitsubishi UFJ Trust and Banking Corporation Ⅱ

MTBJ

872,839,643

UBS Asset Management (Japan) LtdⅠ

SSTB

812,693,087

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

SSTB

120,265,556

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

MTBJ

570,463,103

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

SSTB

136,828,648

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

MTBJ

29,348,405

Nomura Asset Management Co., Ltd. Ⅱ

MTBJ

64,263,388

Asset Management One Co., Ltd. Ⅷ

MTBJ

120,925,331

BlackRock Japan Co., Ltd. Ⅳ

MTBJ

281,184,746

Nomura Asset Management Co., Ltd. Ⅳ

MTBJ

2,833,358,990

BlackRock Japan Co., Ltd. Ⅴ

MTBJ

45,097,195

FIL Investments (Japan) Limited Ⅱ

MTBJ

160,114,251

BlackRock Japan Co., Ltd. Ⅵ

MTBJ

176,632,327

BlackRock Japan Co., Ltd. XIV

MTBJ

63,681,621

BlackRock Japan Co., Ltd. XV

MTBJ

94,519,462

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅴ

MTBJ

97,403,947

544,685,944

Domestic
equities
passiveinvestment

RemarkscolumnBlackRock Japan Co., Ltd. Ⅶ

MTBJ

7,522,249

BlackRock Japan Co., Ltd. Ⅷ

MTBJ

158,701,001

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅳ

SSTB

30,230,206

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅵ

MTBJ

254,960,020

Resona Asset Management Co., Ltd. Ⅲ

SSTB

46,211,162

146,267,156

SSTB

7,918,826

Mitsubishi UFJ Trust and Banking Corporation Ⅲ

MTBJ

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

SSTB

61,181,645

Mitsubishi UFJ Trust and Banking Corporation Ⅳ

MTBJ

268,849,397

Resona Asset Management Co., Ltd. Ⅵ

SSTB

3,137,920

Mitsubishi UFJ Trust and Banking Corporation Ⅴ

MTBJ

204,712,970

Resona Asset Management Co., Ltd. Ⅶ

SSTB

49,643,338

Resona Asset Management Co., Ltd. Ⅷ

MTBJ

81,279,818〇〇

Chapter 3

Foreignbonds
passiveinvestment

Asset manager name

Remarks
Custodians Investment fees
column94

Reference Data

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

(Unit: ¥)Investment
methodDomestic
equities
activeinvestment

Foreignequities
passiveinvestment

Asset manager name

Custodians Investment fees

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

MTBJ

798,394,298

Invesco Asset Management (Japan) LimitedⅠ

MTBJ

1,330,353,089

Capital International K.K.

MTBJ

6,652,000,906

Schroder Investment Management (Japan) Limited Ⅱ

MTBJ

655,601,224

Nikko Asset Management Co.,Ltd. Ⅲ

CBJ

138,123,271

Nomura Asset Management Co., Ltd. Ⅴ

MTBJ

745,890,427

Nomura Asset Management Co., Ltd. Ⅹ

CBJ

378,948,637

FIL Investments (Japan) Limited Ⅲ

MTBJ

2,456,302,810

Sumitomo Mitsui DS Asset Management
Company, Limited Ⅱ

MTBJ

338,793,885

Russell Investments Japan Co., Ltd.Ⅰ

MTBJ

2,576,211,690

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

MTBJ

519,132,481

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

MTBJ

203,820,217

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

MTBJ

44,436,814

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

MTBJ

9,149,836

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

MTBJ

27,474,010

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

MTBJ

734,396,174

BlackRock Japan Co., Ltd. XVI

MTBJ

455,987,393

Sumitomo Mitsui Trust Asset Management Co., Ltd. Ⅶ

MTBJ

368,621,840

Legal & General Investment Management Japan KKⅠ

MTBJ

757,206,288

Remarkscolumn(Unit: ¥)Investment
methodForeignequities
activeinvestment〇〇
Alternative
infrastructure

Alternative
real estate

Asset manager name

Custodians Investment fees

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

MTBJ

1,908,217,766

MFS Investment Management K.K.

MTBJ

741,002,175

Nikko Asset Management Co., Ltd. Ⅱ

MTBJ

1,824,756,426

BNY Mellon Investment Management Japan
Limited Ⅱ

MTBJ4,595,718,604

Mitsubishi UFJ Trust and Banking Corporation Ⅵ

MTBJ

14,795,952,668

UBS Asset Management (Japan) Ltd Ⅱ

MTBJ

6,599,902,561

Lazard Japan Asset Management K.K. Ⅱ

MTBJ

623,729,267

DBJ Asset Management Co., Ltd.

SSTB

16,425,200

Nomura Asset Management Co., Ltd. Ⅵ

SSTB

487,987,591

Sumitomo Mitsui DS Asset Management
Company, Limited Ⅲ

SSTB

588,449,350

Asset Management One Co., Ltd. Ⅻ

SSTB

715,847,466

Mitsubishi UFJ Trust and Banking
Corporation Ⅷ

SSTB

582,521,376

Remarkscolumn(Unit: ¥)Investment
methodCustody

Transition
management

Custodian, etc. name

Custodians Investment fees
9,879,114,815

State Street Trust and Banking Co., Ltd.

SSTB

Custody Bank of Japan, Ltd.

CBJ2,286,924,771

The Master Trust Bank of Japan, Ltd.

MTBJ

25,760,398,453

BlackRock Japan Co., Ltd. XVII (Foreign bonds)

SSTB

345,237

Nomura Asset Management Co., Ltd. Ⅺ(Domestic equities)

MTBJ

2,200,000

BlackRock Japan Co., Ltd. XVIII (Domestic equities)

MTBJ

5,090,767

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

MTBJ

55,000(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 2021 with less than three years of investment period since April 2019.
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) The custody service providers listed in the table of external asset managers are those as of the end of fiscal 2021. However, for funds that were terminatedduring fiscal 2021, the custody service provider at the time of termination is shown.
(Note 6) Fees paid to custodians include certain fees that are deducted from the entrusted assets, such as custody fees and attorney fees.
(Note 7) The investment fees of State Street Trust and Banking Co., Ltd., related to alternative assets is ¥402,430,583.

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

Investment returns

Investment fees

Domestic
bonds

3,257,193,703

314,808,174

Foreignbonds

66,041,256,341

16,279,960,493

Foreignequities

10,800,563,021

2,203,955,613(Note 1) Returns in the table represent premium charges excluding fees.
(Note 2) Fees indicate management fees and agent fees.

95Reference Data｜ 2 Factor Analysis of Excess Rate of Return

2

Factor Analysis of Excess Rate of Return［ 1 ］Factor analysis of excess rate of return on domestic bonds (by manager benchmark, etc.)(Unit: %)NOMURA-BPI NOMURA-BPI
U.S.
EuropeNOMURA-BPI NOMURA-BPI
U.S. MBS(excluding
government government government(excluding plus InflationJPY hedged
ABS)
bonds
JPY hedged JPY hedged
ABS)
Linked bonds(passive)(passive)(passive)(passive)(passive)(active)(active)

InflationLinkedbonds(active)

Alternative(active)

Short-term
assets(others)

Total

Benchmark factors

0.00

-0.06

-0.07

-0.01

-0.11

0.00

+0.00

+0.27

0.00

+0.01

+0.04

Fund factors

+0.04

+0.01

+0.01

-0.00

+0.06

+0.02

+0.04

-0.03

+0.05

+0.00

+0.19

(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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.

［ 2 ］Factor analysis of excess rate of return on foreign bonds (by manager benchmark, etc.)(Unit: %)WGBI(passive)

WGBI
others(passive)

U.S.
U.S.
EuropeU.S.
government
government
government corporate
1-3years(passive)(passive)(passive)(passive)

Europecorporate(passive)U.S.
high–yield(passive)

Europehigh–yield(passive)

Benchmark factors

0.00

-0.02

+0.47

+0.00

-0.61

-0.00

+0.00

+0.03

-0.00

Fund factors

+0.02

+0.00

+0.01

-0.00

-0.01

-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
Alternative
U.S. dollar local currency(active)(active)(active)

Short-term
assets(others)

Total

Benchmark factors

+0.03

+0.08

-0.09

+0.03

-0.00

+0.00

-0.02

0.00

+0.01

-0.09

Fund factors

+0.03

+0.03

-0.01

+0.00

+0.00

+0.00

-0.01

+0.42

-0.00

+0.50

Chapter 3(Note 1) The benchmark of foreign bonds is FTSE World Government Bond Index (not incl. JPY, CNY, 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, CNY, no hedge/JPY basis)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.

［ 3 ］Factor analysis of excess rate of return on domestic equities (by manager benchmark, etc.)(Unit: %)TOPIX(passive)

RUSSELL/NOMURAPrime(passive)

MSCI
JAPAN IMI
REIT
(passive)

MSCI JapanESG SelectLeaders(passive)

MSCI Japan
Empowering
Women(passive)

FTSE
BlossomJapan(passive)

FTSE Blossom
Japan Sector
Relative(passive)

S&P/JPX
CarbonEfficient(passive)

NOMURA
RAFI(passive)

Benchmark factors

0.00

-0.00

-0.00

+0.07

-0.03

+0.11

+0.01

+0.00

+0.09

Fund factors

+0.01

+0.00

-0.00

-0.00

-0.00

+0.00

-0.00

+0.00

-0.00

(Unit: %)TOPIX(active)

RUSSELL/
RUSSELL/
RUSSELL/
MSCI JapanNOMURA Large NOMURA Small NOMURA Small
Small
Cap ValueCap
Cap Growth(active)(active)(active)(active)

Alternative(active)

Total

Benchmark factors

0.00

+0.06

-0.02

-0.03

-0.01

0.00

+0.24

Fund factors

-0.11

-0.01

-0.01

-0.00

+0.00

+0.01

-0.12

(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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.

96

Reference Data

2 Factor Analysis of Excess Rate of Return［ 4 ］Factor analysis of excess rate of return on foreign equities (by manager benchmark, etc.)(Unit: %)Europe &Middle East
(passive)MSCI
ACWI ESG
Universal(passive)

Morningstar
Gender Diversity(passive)

ACWI(passive)

North
America(passive)

Benchmark factors

+0.01

+0.38

-0.08

-0.02

-0.47

+0.05

+0.01

+0.02

Fund factors

+0.06

-0.02

+0.00

+0.00

+0.00

-0.00

-0.00

-0.00

ACWI
(active)

Developed(active)

Emerging(active)

Alternative(active)

Total

Benchmark factors

-0.00

+0.29

-0.11

-0.02

+0.06

Fund factors

-0.55

-0.49

-0.05

+0.09

-0.96

Pacific(passive)

Emerging S&P Carbon(passive)(passive)(Unit: %)(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)).
(Note 3) Fund factors refer to those resulting from differences in rates of return between individual funds and manager benchmarks.

97

Reference Data｜ 3 Portfolio Holdings by Asset Category as of Mar. 31, 2022

3

Portfolio Holdings by Asset Category as of Mar. 31, 2022

These are lists to summarize GPIF’s top 10 portfolio holdings as of March 31, 2022 (as of the end of fiscal 2021), either
indirectly through external asset managers or directly with GPIF’s in-house capacity for bonds, by name for bondsand equities.
These do not purport to represent GPIF’s evaluation of individual companies.
Russia-related assets including in market capitalization at the end of March 2022 are valued at zero in principle, due
to situations such as trade restriction against foreign investors, difficulties in settlement and exchange transaction,and difficulties in access to sufficient information about trading.
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

10,657

1

TOYOTA MOTOR CORP.

947,620,500

21,317

2

Fixed-rate Bonds JGB #365

6,524

2

SONY GROUP CORP.

115,913,100

14,7963

10-year Inflation-Indexed Bonds JGB #21

6,428

3

KEYENCE CORP.

15,983,200

9,167

4

Fixed-rate Bonds JGB #149

5,760

4

MITSUBISHI UFJ FINANCIAL GROUP,INC.

1,127,494,300

8,736

5

Fixed-rate Bonds JGB #360

5,653

5

TOKYO ELECTRON LTD.

12,873,200

8,232

6

Fixed-rate Bonds JGB #150

5,644

6

RECRUIT HOLDINGS CO.,LTD.

138,425,400

7,509

7

10-year Inflation-Indexed Bonds JGB #19

5,587

7

NIPPON TELEGRAPH AND TELEPHONE CORP.

199,092,700

7,177

8

Fixed-rate Bonds JGB #146

4,414

8

SHIN-ETSU CHEMICAL CO.,LTD.

33,463,800

6,372

9

Fixed-rate Bonds JGB #145

4,333

9

NINTENDO CO.,LTD.

10,016,800

6,286

10

Fixed-rate Bonds JGB #364

4,076

10

MITSUBISHI CORP.

128,322,300

5,995

460,269

Total

Total

4,844 securities

Foreign bonds holdings in order of market value
No.

Security name2,347 securities

489,475

Foreign equities holdings in order of market valueMarket value(¥100 million)

No.

Security nameSharesMarket value(¥100 million)

Fannie Mae or Freddie Mac 2PCT APR22

2,725

1

APPLE INC

99,297,286

21,044

2

US TREASURY N/B 1.125PCT 15FEB31

2,081

2

MICROSOFT CORP

46,562,587

17,424

3

Fannie Mae or Freddie Mac 2.5PCT APR22

2,039

3

AMAZON.COM INC

2,793,047

11,051

4

US TREASURY N/B 1.625PCT 15MAY31

2,002

4

ALPHABET INC-CL A

1,955,985

6,603

5

US TREASURY N/B 2.875PCT 15MAY28

1,807

5

TESLA INC

5,046,730

6,601

6

US TREASURY N/B 1.25PCT 15AUG31

1,792

6

ALPHABET INC-CL C

1,795,691

6,087

7

US TREASURY N/B 2.875PCT 15AUG28

1,739

7

NVIDIA CORP

15,736,695

5,212

8

US TREASURY N/B 1.375PCT 15NOV31

1,673

8

TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

153,693,373

3,903

9

FRANCE (GOVT OF) 2.5PCT 25MAY30

1,654

9

META PLATFORMS INC-CLASS A

13,914,120

3,755

10

US TREASURY N/B 0.875PCT 15NOV30

1,644

10

UNITEDHEALTH GROUP INC

5,992,086

489,571

Total

Total

10,189 securities

3,573 securities

Chapter 31

3,709
490,171

Alternative Assets holdings in order of market value
No.

Alternative Assets

Security nameMarket value(¥100 million)

1

Infrastructure

STEPSTONE G INFRASTRUCTURE OPPORTUNITIES, L.P.

3,992

2

Infrastructure

PANTHEON G INFRASTRUCTURE OPPORTUNITIES LP

2,621

3

Infrastructure

GLOBAL ALTERNATIVE CO-INVESTMENT FUND I

1,864

4

Infrastructure

TORANOMON INFRASTRUCTURE 1, L.P.

1,000

5

Infrastructure

DG INFRASTRUCTURE OPPORTUNITIES L.P.

617

6

Infrastructure

DG INFRASTRUCTURE, ILP

474

7

Infrastructure

TORANOMON INFRASTRUCTURE 2 LP

218

1Private Equity

TORANOMON PRIVATE EQUITY 1 AIV, L.P.

1,642

2

Private Equity

TORANOMON PRIVATE EQUITY 2 AIV, L.P.

1,059

3

Private Equity

GLOBAL ALTERNATIVE CO-INVESTMENT FUND II

365

1

Real Estate

CBRE G REAL ESTATE INVESTMENTS, LP

5,564

2

Real Estate

MUTB G REAL ESTATE FUND

2,087

3

Real Estate

TORANOMON REAL ESTATE 1, LP

80(Note) Security names are as of March 31, 2022.

98

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.

For All Generations

21

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