Money managers say a fundamental reconsideration of fee arrangements is underway at the world's biggest pension fund.
Executives with firms managing money for Japan's ¥144.9 trillion ($1.3 trillion) Government Pension Investment Fund, Tokyo, speaking on condition of anonymity, report having broad, open-ended discussions with officials there — "brainstorming," according to one — aimed at hammering out a better alignment of interests.
For now, the giant pension fund remains better known for squeezing fee concessions from managers in exchange for multibillion-dollar mandates, while setting the standard in the region when it comes to client service demands.
Norihiro Takahashi, GPIF's president, in a January interview with Pensions & Investments, suggested his fund's success in lowering fees in years past might be proving an obstacle now to forging partnerships with superior managers.
The pension giant's latest annual report, released July 7, noted its ¥40 billion in manager fees for the fiscal year ended March 31 came to roughly 3 basis points of its portfolio, well below the more than 20-basis-point average for 11 public funds from Canada, Norway, the U.S., Sweden and South Korea referenced in the report.
However, with those overseas funds already making allocations to higher-fee alternatives that GPIF is just gearing up to add, the gap could be less dramatic than those numbers suggest. For example, a P&I estimate from available GPIF data points to roughly ¥11.5 billion in fees paid to global equity managers for the fiscal year ended March 31, or roughly 24 basis points of the fund's ¥4.732 trillion, or $42.5 billion, in global equity allocations. By contrast, the $176.5 billion Florida State Board of Administration paid fees of $137.1 million to global equity managers for the fiscal year ended June 30, 2016, or 29 basis points of the system's $45.8 billion allocated to that asset class, confirmed spokesman John Kuczwanski.
The annual report's summary of compensation outlays for the year said that going forward, GPIF will strive to achieve "efficient, reasonable" fee levels.