Japan’s GPIF to expand direct LP commitments and infrastructure co-investments | Infrastructure Investor

Japan’s Government Pension Investment Fund intends to continue growing its portfolio of direct LP fund commitments and co-investments in unlisted infrastructure, building on its first two such deployments earlier in 2024.

Speaking at the Infrastructure Investor Network Tokyo Forum, GPIF head of infrastructure Kikuko Emae said the fund was in “continuous dialogue” with fund managers and other LPs to learn about the different investment opportunities on offer.

While the fund is open to conversations with potential new partners, Emae said: “We will not be able to engage with every fund manager and will conduct a rigorous screening process – firstly based on performance, followed by quantitative and qualitative due diligence.”

She added that GPIF is “currently cautiously in due diligence” over several additional fund investments or separately managed account commitments. Prior to 2024, GPIF only invested in infrastructure through gatekeepers and funds of funds.

GPIF, which is the world’s largest pension fund with ¥224 trillion ($1.4 trillion; €1.3 trillion) of assets under management, made its first direct LP commitment to an unlisted infrastructure equity fund in April 2024 with a $300 million investment in Brookfield Asset Management’s flagship Brookfield Infrastructure Fund V. It also committed the same amount again to a co-investment sleeve alongside the fund.

Then later that month, GPIF announced a major joint investment program with APG Asset Management, committing up to €1 billion to make long-term infrastructure investments in developed markets outside of Japan.

Emae highlighted the importance of relationships with external fund managers and other LPs to the development of GPIF’s portfolio.

“At GPIF we cannot make investment decisions for specific assets by ourselves and we would always need to work through a manager. Therefore, I cannot stress enough the importance of the managers and partners that we work with in order to fulfill our mission to build the infrastructure portfolio at GPIF,” she said.

Emae added that GPIF is particularly interested in opportunities to invest in domestic Japanese infrastructure, given that the fund is yen-denominated, and would welcome discussions with GPs about this.

“The proportion of domestic infrastructure in our portfolio is still very small, largely due to the market size of investable infrastructure in Japan. As we think of diversification, and that we are a Japanese yen-based pension, we’re focused on potential domestic investment opportunities,” she said.

GPIF’s infrastructure portfolio stood at ¥1.45 billion as of March 2023, according to its most recent annual report. This accounted for around 50 percent of the fund’s private markets portfolio.

Private markets still comprises a tiny fraction of GPIF’s overall portfolio. A more recent update, published in December 2023, showed that GPIF’s private markets portfolio stood at ¥3.4 trillion, or 1.53 percent of its overall portfolio.

Emae said that GPIF can invest up to 5 percent of its assets into unlisted infrastructure but it was “highly unlikely” this would be deployed by March 2025, given the scale of that investment and the fact that the 5 percent figure is a cap, not a target.