Ark Totan Targets Japan Pensions Amid GPIF’s Portfolio Plans

Feb 12, 2014 11:43 am ET

Feb. 12 (Bloomberg) -- Ark Totan Alternative Co. is seeking to increase its Japanese asset trading and advisory business fivefold to 100 billion yen ($976 million) by targeting local pensions looking to boost private investments.

Ark Totan, founded by former Goldman Sachs Asset Management Co. banker Shunsuke Tanahashi, wants to achieve the target in the next few years, said Hidenori Suzuki, who joined the Tokyo- based firm last month from JPMorgan Asset Management (Japan) Ltd., where he was the head of the firm’s strategic advisory group. Ark Totan plans to double staff to as many as 10 as assets grow, Suzuki said.

Japan’s Government Pension Investment Fund, with 124 trillion yen in assets, has revealed plans to invest in infrastructure amid a push to diversify its portfolio away from local bonds. Private investments accounted for about 1 percent of the 70 trillion yen managed by Japanese pensions, compared with about 10 percent at U.S. retirement funds, Suzuki said.

“Given the expected plans by GPIF, we could see more Japanese institutional investors allocating money to private investments,” Suzuki said in an interview. “Private investments will allow pensions to control volatility, while boosting returns and that’s what they need.”

Private investments include those that are not publicly traded such as infrastructure, private equity, mezzanine securities, real estate and private real estate investment trusts, Suzuki said.

Private Investments

GPIF, the world’s largest manager of retirement savings, and other public pensions should consider investing more in assets abroad, private equity, commodities, infrastructure and REITs, an advisory panel has said in a report.

Japan’s consumer prices rose 1.6 percent from a year earlier in December, the fastest since 2008, in a sign that Prime Minister Shinzo Abe’s unprecedented stimulus aimed at pulling the country out of 15 years of deflation is working. Rising inflation tends to dent demand for bonds as it erodes the value of the securities’ fixed payments.

Institutional pension fund managers across 13 countries reduced the proportion of assets held in bonds to 29 percent in 2013, from 34 percent a year earlier, a global study by researcher Towers Watson & Co. showed. The managers boosted equity holdings to 52 percent from 47 percent.

Ark Totan, which said it had business worth 20 billion yen in 2013, wants to lure institutional investors, including pensions, by acting as a placement agent to introduce certain types of private investments, Suzuki said. It also plans to assist underfunded pensions looking to dissolve their funds through the sale of assets in secondary markets, he said.

“The biggest difference between Japanese pensions and the overseas pensions is the allocations to private investments,” Suzuki said. “This gap may start to narrow this year.”

--Editors: Iain McDonald, Andreea Papuc