GPIF first invests in Japanese alternative investment funds, with 50 billion yen allocated to real estate and data centers.

The Japanese government's pension investment fund (GPIF) has made its first independent choice of domestic alternative asset funds to invest in, allocating a total of 50 billion yen (approximately 340 million US dollars) towards real estate and infrastructure, particularly data center infrastructure. Of this amount, 40 billion yen will be allocated to infrastructure funds, and 10 billion yen to real estate funds. This move signifies that GPIF is no longer relying on asset management companies to select funds. Although the 50 billion yen investment size is not large for GPIF, which manages approximately 260 trillion yen in assets, and its allocation to alternative investments is limited to within 5% of total assets, as of the end of June, this ratio was only 1.6%, still far below the upper limit. GPIF had previously invested in overseas alternative asset funds. It is widely understood that global pension funds generally seek additional returns from private equity, real estate, and other alternative assets, which are less affected by stock and bond market fluctuations. However, higher returns come with higher risks, such as low liquidity making it difficult to sell assets quickly during market downturns, and sensitivity to trends in the real estate market and changes in infrastructure demand. By independently selecting funds this time, without going through asset management companies, GPIF will enhance its monitoring capabilities over investments. This change actually took place in the fiscal year ending in March 2023, but prior to this, GPIF mainly focused on investing in overseas private equity, real estate, and infrastructure funds. Mitsubishi UFJ Morgan Stanley Securities analyst Hidetaka Mazue pointed out that GPIF needs to avoid distorting market prices through large transactions or engaging in private investment activities. While the current amount of domestic investments in Japan is limited, it is "expected to provide support for market expansion." Compared to its major international counterparts, GPIF still lags behind in the amount of alternative assets it holds. For example, as of the end of June, the proportion of alternative assets in the Korean National Pension Service's portfolio had reached about 16% of its $92 billion investment portfolio. The annual report of the CPP Investments, Canada's retirement fund, showed that about 56% of its assets are invested in infrastructure, real estate, credit, and private equity by 2025; as of August 31, private equity and real estate investments accounted for 15% and 13% of the California Teachers' Retirement Fund's funds (excluding infrastructure). The specific operations of GPIF's independent entry into the Japanese market this time include: investing 40 billion yen into an infrastructure fund established by DigitalBridge Group Inc. in Boca Raton, Florida, which targets assets including data centers; and investing 10 billion yen into a real estate fund initiated by Morgan Stanley. The investment period for both funds is 10 years. A spokesperson for GPIF emphasized that the real estate fund from Morgan Stanley is the first time they have independently selected a fund focused on domestic alternative assets. Morgan Stanley and DigitalBridge representatives both declined to comment on this investment. In July, GPIF Chairman Kazuhito Uchida stated that GPIF has established a new team specifically to compare the risks and excess returns of alternative assets with listed assets.