Noboru Terada, former CIO of Japan's Government Pension Investment Fund, ripped the new governance structure of the world's largest pension fund at the CFA Institute's annual meeting today in Zurich.
Mr. Terada, who retired as the executive investment officer March 31, said the roughly 150 trillion yen ($1.34 trillion) fund is essentially a puppet of the Ministry of Health, Labor and Welfare, which provides several of the fund's top officials. The Tokyo-based fund's president is a former Japanese central banker. Mr. Terada said no one in the entire organization has a doctorate or CFA certification, and staffers do not bear fiduciary responsibility for their decisions.
What's more, the Minister of Health, Labor and Welfare appoints the members of the fund's advisory committee. Of the committee's 11 members, seven are academics who don't contribute to investment discussions, and only one is an investment professional, he said. In addition, advisory committee meetings are kept confidential, with no opportunity for public comment, he said.
Mr. Terada said the fund lacks policies to maximize returns without incurring undue risk. Investment decisions are driven by detailed rules rather than professional judgment, and the fund's risk management standards and performance monitoring are faulty, he said.