Photographer: Tomohiro Ohsumi/Bloomberg

World's Biggest Pension Fund Gets More Serious on Abe's Overhaul

  • GPIF calls for new passive managers of Japanese equities
  • Fund ties the hiring to plan to boost stewardship activities

The world’s biggest pension fund announced plans to hire new external managers of Japanese stocks, saying it was seeking to improve how the fund interacts with companies it invests in.

The $1.3 trillion Government Pension Investment Fund called for applications for passive managers of Japanese equities in a statement in Tokyo on Monday. GPIF is seeking to encourage competition among asset managers in areas such as how they carry out stewardship activities, and ideas around good business models, according to Shinichiro Mori, a spokesman for the fund. Registration of applications begins in late March, while the review process starts June 1, GPIF said in a statement.

“It’s good that they’re looking for new managers. It’s positive that there’ll be more competition, and not just the same managers handling funds,” Ryuta Otsuka, a Tokyo-based strategist at Toyo Securities Co. said. GPIF’s external managers should help improve corporate governance among Japanese companies, he added.

The move is a sign that GPIF is putting more weight behind Prime Minister Shinzo Abe’s attempts to make Japanese companies more efficient and profitable. Under Abe, Japan instituted a corporate governance code for companies in 2015 and a stewardship code in 2014 to enlist institutional investors to press companies to invest their excess cash for growth or boost returns to shareholders.

Fulfilling duties as responsible stewards is most difficult and costly for passive managers, because they invest in large numbers of stocks based on indexes, unlike their active counterparts that hold fewer companies and tend to be more aware of their businesses and strategies.