Private equity investments are becoming more "mainstream" than "alternative" for asset owners seeking exposure to the U.S. market, said Hiromichi Mizuno, chief investment officer of Japan's ¥162.7 trillion ($1.5 trillion) Government Pension Investment Fund.
Speaking Tuesday in Hong Kong at the CFA Institute's annual conference, Mr. Mizuno said, "there are … less than 7,000 companies now listed in the U.S., compared to almost 8,000 companies operated and owned by private equity firms."
"It's no longer possible for me to call (private equity) an alternative asset class. It's becoming more mainstream if we want to take advantage of U.S. economic activities," said Mr. Mizuno on a panel discussing "The Future of Global Investing."
The rising profile of unlisted companies, together with the low correlations private equity has with other major asset classes, are reasons the GPIF is "determined to go into private equity (in) a big way," despite concerns that hefty valuations now could pose significant risks, he said.
While acknowledging concerns the GPIF's potential private markets allocations — capped at 5% of the portfolio, or $74 billion — could have a big impact on the market, Mr. Mizuno said, "from a holistic viewpoint, I have no choice but to invest in private equity."
The chief investment officer, speaking on the sidelines of the conference following the panel discussion, painted his assertion that private equity is becoming essential to accessing the U.S. market opportunity set as a "challenge (to) people's mindset."
He suggested he isn't calling for the rules limiting GPIF's allocations to private markets to be lifted. The private markets portfolio includes including private equity, infrastructure and real estate.
As of Dec. 31, GPIF reported private markets allocations of just $1.5 billion, or roughly 10 basis points of its portfolio.