World's biggest pension fund gets more serious on Abe's overhaul

Mr Abe has instituted a corporate governance code and a stewardship code, to enlist institutional investors to press firms to invest excess cash for growth or boost shareholder returns. Japan's pension fund's plan to hire new external managers of sto
Mr Abe has instituted a corporate governance code and a stewardship code, to enlist institutional investors to press firms to invest excess cash for growth or boost shareholder returns. Japan's pension fund's plan to hire new external managers of stocks shows it is also putting weight behind Mr Abe's bid to make firms efficient and profitable.PHOTO: REUTERS

TOKYO • The world's biggest pension fund announced plans to hire new external managers of Japanese stocks, saying it was seeking to improve how the fund interacts with companies it invests in.

The US$1.3 trillion (S$1.83 trillion) Government Pension Investment Fund (GPIF) called for applications for passive managers of Japanese equities in a statement yesterday.

GPIF is seeking to encourage competition among asset managers in areas such as how they carry out stewardship activities, and ideas around good business models, according to Mr Shinichiro Mori, a spokesman for the fund.

Registration of applications begins later this month, while the review process starts on June 1, said GPIF in a statement.

"It's good that they're looking for new managers. It's positive that there'll be more competition, and not just the same managers handling funds," said Mr Ryuta Otsuka, a Tokyo-based strategist at Toyo Securities.

ENCOURAGING MORE COMPETITION

It's good that they're looking for new managers. It's positive that there'll be more competition, and not just the same managers handling funds.

MR RYUTA OTSUKA, a Tokyo-based strategist at Toyo Securities, of the new plans.

GPIF's external managers should help improve corporate governance among Japanese companies, he added.

The move is a sign that GPIF is putting more weight behind Prime Minister Shinzo Abe's attempts to make Japanese companies more efficient and profitable.

Under Mr Abe, Japan instituted a corporate governance code for companies in 2015 and a stewardship code in 2014, to enlist institutional investors to press companies to invest their excess cash for growth or boost returns to shareholders.

Fulfilling duties as responsible stewards is most difficult and costly for passive managers, because they invest in large numbers of stocks based on indexes, unlike their active counterparts that hold fewer companies and tend to be more aware of their businesses and strategies.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 14, 2017, with the headline 'World's biggest pension fund gets more serious on Abe's overhaul'. Print Edition | Subscribe