Japan’s Government Pension Investment Fund (GPIF) is developing a database on alternative investments as it increases its exposure to the asset class.
“Our 5th 5-year Medium-Term Target starting in FY 2025 stipulates that alternative investments should be made from the perspective of obtaining excess returns, and it is important for GPIF to select investment opportunities that are expected to generate excess returns compared to traditional markets,” the pension fund said in a statement.
GPIF added that it has hired Eagle Investment System LLC, an affiliate of The Bank of New York Mellon Corporation, as the vendor to collect data.
The selection and evaluation of individual funds has leaned heavily on qualitative judgments, as quantitative evaluations have largely relied on comparisons among similar funds based on a narrow set of metrics, such as internal rate of return (IRR) and investment multiples. With the new data infrastructure, GPIF said, it hopes to enhance confidence in obtaining excess returns.
Since 2017, GPIF has increased its commitments to alternatives from 0.24% to 2.86%, reaching $48.5 billion by the fiscal year ending March 2025.
Its alternative portfolio includes funds managed by Stepstone Partners, Pantheon, Brookfield, Global Infrastructure Partners, EQT, and CVC Capital Partners, among others.
As of March 2025, the total market value of these investments reached nearly 4.2 trillion yen.
Over that period, GPIF reported an overall yen-denominated IRR of 10.14%, while private equity generated returns exceeding 15%.
Its private equity investments span startups, growth, expansion, and turnaround strategies.
During fiscal 2024, the pension fund said it continued to monitor performance indicators such as TVPI and IRR, benchmarking them against available market data. It also used breakdowns of the increase or decrease in NAV to measure the performance of all alternative asset funds.
GPIF also adopted a new analytical framework known as Spread-Based Direct Alpha (SBDA) to conduct comparisons not only against policy benchmarks for GPIF stocks and bonds, but also against asset classes, investment regions, and types of businesses.
GPIF has also applied the measurement of excess returns using SBDA and the factor analysis of increase or decrease in NAV previously performed at the fund-of-funds or limited partnership level to the level of individual projects that it invests in.
Qualitative analysis remains crucial to back up the changes in data obtained through quantitative analysis. “GPIF has thus attempted to more closely monitor fund managers’ skill in value creation, while at the same time attempting to improve operational due diligence for the purpose of checking that fund managers can invest in a stable and ongoing manner,” the pension scheme said in its FY2024 annual report.
