Japanese LPs value site visits with infrastructure managers

“Visiting a company’s office allows you to get a sense of the atmosphere and how people work together. Is it a collection of individuals or a proper team? You get to see whether the reality matches your image,” Yoshi Kiguchi, CIO of Okayama Metal & Machinery Pension Fund, told the Infrastructure Investors Forum in Tokyo. “This is a 10-year game, so it’s important.”

The Okayama fund, which is in the process of merging with one of its industry peers, started investing in infrastructure around 2009. Its exposure to illiquid assets peaked at 30% – it was recently reduced – and infrastructure accounts for approximately 4%. Kiguchi noted that check sizes tend to be relatively small, which means suspicions are aroused if a fund’s investor relations professionals are too attentive.

“If you think someone is small fry then you treat them as small fry,” he said. “If you are treated very comfortably, then I get concerned because they might have other clients going away from them.”

These are conclusions that can only be reached after meeting teams in person. The importance of this was endorsed by Masanori Asawaka, CIO of Denso Pension Fund, who sees it as integral to understanding the nature of a firm’s value-add and whether they can deliver repeatable returns. Denso has 10% of its assets in alternatives but wants to increase this figure to 20%. The infrastructure allocation, currently 3%, is intended to reach 5%.

“Can we work as partners with these people? That is more important than anything else,” Asawaka said.

Corporate pension funds have limited manpower to cover alternatives and infrastructure teams can be stretched – Aisin Employees’ Pension Fund, for example, has two people responsible for an allocation that is supposed to represent 7% of total assets, across closed-end and open-end funds. Even though Japanese pension funds are required to run their investments through intermediaries that conduct due diligence, Okayama’s Kiguchi believes money should be set aside for site visits.

“People who visit you only talk about the good points,” he said. “When you visit them, they are more frank and talk about lots of things. You have asset managers and trust banks, but it’s very important to have a budget that allows you to visit people.”

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• Topics
• LPs
• Fundraising
• Infrastructure
• Infrastructure
• Japan
• Denso Pension Fund
• Infrastructure