Money managers garnered a record ¥61 billion ($553 million) in fees managing the Government Pension Investment Fund's ¥186.2 trillion portfolio — roughly half of Japan's pension assets — for the fiscal year ended March 31.
Those outlays easily topped the previous record of ¥48.7 billion for the year ended March 31, 2018. At the April 2018 start of the following fiscal year, GPIF moved to achieve a better alignment of interests with its external managers, instituting higher performance fees but only passive payouts for managers that fail to top their benchmarks.
The year the new system went into effect, GPIF's fee payments plummeted to ¥29.5 billion before rebounding slightly to ¥31.9 billion for the year through March 31, 2020 — roughly 2 basis points of the weighted average of the portfolio's holdings.
GPIF's then-chief investment officer, Hiromichi Mizuno, insisted the world's biggest pension fund wasn't intent on lowering fees and stood willing to pay handsomely for performance — even as roughly 80% of the pension fund's portfolio continues to be managed passively. The fund ended its March 31 fiscal year with roughly 25% of its portfolio, or more than ¥47 trillion, each in domestic and foreign stocks and bonds. Within those segments, active allocations came to 27% for domestic bonds, 24% for foreign bonds, 12% for foreign stocks and 7% for domestic stocks.
The volatile, pandemic-stricken year through March 2021 effectively became the first broad test of GPIF's willingness to pay for alpha, with more than 80% of the pension fund's roughly 50 active managers outperforming their benchmarks — many by substantial margins. The year before, 18 managers outperformed while 29 underperformed. For the year ended March 31, 2019, 24 bested their benchmarks and 25 underperformed.
GPIF's latest annual report suggests that managers were able to share in the portfolio's stellar 25% — or $340 billion — gain for the year, with fee payouts up more than 90% and climbing for the first time to roughly 4 basis points of the portfolio's value.