Pensions & Investments 11th Global Pension Symposium, held at Tokyo's Ritz Carlton hotel Nov. 14 and 15, opened with a stark exposition of the challenges Japan's demographic time bomb poses for the country's pension system.
And while discussion quickly moved on to innovation — in business, medicine and pension fund management — as well as investment opportunities in areas such as distressed debt, bank loans, private credit and real estate, the prospect of managing pension assets for a shrinking population continued to cast a shadow over the proceedings.
Kohei Komamura, a professor of economics at Tokyo-based Keio University and director of the school's Research Center for Financial Gerontology, opened the conference's first day with a talk depicting a future for Japan where deaths will outpace births at an annual clip of more than 1 million, and where dementia will threaten the ability of many pensioners to manage the private pensions he contended must play a bigger role in Japan's retirement security going forward.
To the extent even healthy retirees are called upon to make their own investment decisions, that could spell trouble, the next speaker, Anton van Nunen, director and owner of Netherlands-based institutional investor consultancy Van Nunen & Partners BV, warned. While his talk focused on pension developments in Europe, Mr. van Nunen said in light of the inability of individuals to invest for the long term, moves to shift the burden of saving for retirement from pensions to individual accounts would portend "disaster."
Ken Nagata, Tokyo-based manager of treasury analysis with IBM Japan, in the conference's first panel discussion, noted the impact net outflows are having now on many "mature" corporate pension funds in Japan, resulting in shorter-term liabilities and increased risks for the decumulation stage. That, in turn, is forcing pension executives to focus more on downside risks, he added.
Such challenges are boosting interest now in outsourced chief investment officer services, some panel members said.
Demographics surfaced again in the conference session, and subsequent panel discussion, on real estate investment opportunities. Keynote speaker Sean Ruhmann, a Boston-based partner with TA Realty LLC, pointed to the U.S.' relatively high population growth, vis-à-vis Japan and Europe, making U.S. real estate a more attractive destination for investments.
However, in the panel discussion that followed, Eriko Kato, general manager with Mitsubishi Jisho Investment Advisors Inc.'s international investment client relations office, noted that even as Japan's overall population declines, cities like Tokyo should continue to enjoy population growth, supporting real estate investments there - even if the opportunity set remains limited compared to those on offer in the U.S.
It wasn't all doom and gloom.
Conference attendees heard from Yoshiyuki Sankai, CEO/President of CYBERDYNE Inc. and professor at Tsukuba University, about his firm's "cybernics" products, melding humans, robots and information systems, allowing people with disabilities to regenerate physical capabilities.
The conference's second day started off with a speech by Hugh O'Reilly, the president and CEO of Canada's OPTrust, a Toronto-based pension plan with C$18.4 billion ($14.4 billion) in assets, about his team's efforts to integrate innovation into the organization's DNA.
Mr. O'Reilly said the new strategic plan his board approved in October for the coming five years aims to enhance the pension plan's sustainability by "developing innovation as a critical skill," as opposed to adopting a narrower view focused on technological disruption.
He cited his fund's commitment to staff development and its "incubation portfolio" of roughly C$300 million ($234 million) for "small, calculated investments" in new areas as building blocks of OPTrust's efforts to become "the world's most innovative pension plan by 2022."