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Japan’s GPIF Grants Mitsubishi UFJT Domestic RE Mandate, Eyes Performance-Based Fees for Managers

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Japan’s Government Pension Investment Fund (GPIF) has granted a mandate to Mitsubishi UFJ Trust and Banking to handle its domestic real estate investments in Japan, which will likely focus on blue-chip core office properties in Tokyo through the creation of a fund-of-funds. GPIF put out a call in April to real estate and infrastructure managers after confirming that it was planning on allocating 5% of its portfolio towards alternative asset classes and was looking to expand its investments in global core real estate and infrastructure.

The world’s largest pension fund is also reportedly considering shifting to a performance-based fee structure for its asset managers in an effort to improve returns and reduce costs. Under the new system, managers that meet their return targets will be paid similarly to how the they are now. Any returns beyond that goal will net their progressively greater rewards. Returns will be evaluated on time spans of three to five years to promote long-term growth over short-term returns. The changes will initially only apply to the more than 50 active equities managers under GPIF’s employee, and are scheduled to go into effect in April of 2018.

“Actively managed Japanese stock funds used for GPIF assets did not earn their keep over the past decade, with their investment returns undershooting index growth by 0.04 percentage point despite the funds being paid higher than passively managed funds. The GPIF hopes performance-linked fees will change this around,” said President Norihiro Takahashi, who earned the top spot in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking for 2017.

Hiromichi Mizuno, GPIF’s chief investment officer since 2014, has been a vocal advocate for adjusting the cost structure used by active asset managers, and is reportedly involved in plans to introduce artificial intelligence and big data analytics into the fund’s financial modeling sometime in 2018.

GIC Sells Arizona Biltmore to Blackstone

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Blackstone Real Estate Advisors, part of the Blackstone Group, acquired the 740-room Arizona Biltmore hotel, located in Phoenix, for US$ 403.4 million. The deal closed on April 20, 2018.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Acquires Stake in Growing Hedge Fund Phoenician Capital

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Mubadala Investment Company, through its unit Mubadala Capital, purchased a minority stake Phoenician Capital, LLC. Although terms and size of the deal were not disclosed, the agreement grants Mubadala Capital rights to invest in a fund managed by the New York-based firm, which generated respective returns of 40.8% and 33.0% in 2016 and 2017, against benchmarks of 12.0% and 21.8% for the S&P 500. The hedge fund runs the Phoenician Offshore Fund Ltd.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Large Asset Managers Continue to Move Operations Out of California

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In the 2010s, Fisher Investments, an investment firm run by Ken Fisher, moved a large number of employees from the Woodside and San Mateo campuses to a town called Camas in Washington, near Portland. Vanguard has a large operational presence in Arizona, while Charles Schwab Corporation has expanded its technology operations and client services in places like Denver, Dallas, Austin and Phoenix. Dimensional Fund Advisors moved its headquarters in 2008 from Santa Monica, California to Austin.

While asset managers reap profits and try to lower employee head count costs, looking to fly-over country seems appealing.

The Pacific Investment Management Company (PIMCO), part of the Allianz family, selected Austin, Texas as its new office to hire more client services and technology talent. The PIMCO Austin office will open later in 2018. PIMCO is headquartered in Newport Beach, California, with an office in New York City.

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