Will GPIF's New CIO Rise to the Challenge?

Yoshiaki Nohara and Shigeki Nozawa of Bloomberg report, GPIF Names Private Equity Executive as Investment Head:

The world’s biggest manager of retirement savings named a private-equity executive as head of investment after the Japanese fund changed its strategy to seek higher returns.

Hiromichi Mizuno, 49, a partner at London-based Coller Capital Ltd., becomes the first chief investment officer at the $1.1 trillion Government Pension Investment Fund from Jan. 5, the fund announced late yesterday. Mizuno, who joined the fund’s investment committee in July, will lead moves to reduce domestic debt and boost equity holdings to half of assets.

The retirement manager overhauled its asset mix on Oct. 31, pledging to shift $182 billion into stocks as unprecedented quantitative easing by the Bank of Japan risks eroding the value of its bond-heavy portfolio. Mizuno’s appointment comes as a health ministry group debates changes to the fund’s governance, after a separate government panel called on it to move beyond a system in which decision-making power lies with the president.

GPIF set allocation targets of 25 percent each for Japanese and overseas equities last month, up from 12 percent each. The pension manager will cut local debt holdings to 35 percent from 60 percent and boost foreign debt allocations to 15 percent from 11 percent.

Alternative investments, including private equity, infrastructure and real estate, can make up to 5 percent of holdings in GPIF’s portfolio, and will be incorporated in the other asset classes.

Career History

Mizuno joined Coller Capital in 2003 and is responsible for finding, arranging and monitoring investments, according to the company’s website. Mizuno previously worked at the then Sumitomo Trust Bank, with roles including head of private equity investment in New York and vice president of the international credit department in Tokyo, according to the website.

Coller Capital buys assets from other private-equity investors who are seeking to free up capital. It spends from $1 million to more than $1 billion on each transaction and has done deals with Lloyds Banking Group Plc, Credit Agricole SA and Royal Dutch Shell Plc, according to its website.

Japan’s Topix index has jumped 9.2 percent since the day GPIF announced its new strategy and the Bank of Japan unexpectedly added to stimulus. Shares also have gained as the nation’s slip into recession caused Prime Minister Shinzo Abe this week to put off a planned sales-tax increase and dissolve parliament for an early general election.

Eleanor Warwick of the Wall Street Journal also reported, Japan to Name Hiromichi Mizuno CIO of Public Pension Fund:

Japan’s government plans to name a private-equity executive as the first chief investment officer of the nation’s $1.1 trillion public pension fund this week, immediately making him one of the most important investors in the world, according to several people familiar with the matter.

The government will name Hiromichi Mizuno, currently a partner with London-based private-equity firm Coller Capital, to the new role at the Government Pension Investment Fund, the people said.

The appointment would put the 49-year-old from central Japan in control of the world’s biggest fund of its kind as the GPIF tries to increase its returns by investing more aggressively.

Mr. Mizuno would be a big catch for the fund, which has struggled to attract outside talent because of low salaries and a small budget. Despite its size, the GPIF’s roughly 80 employees are squeezed into one floor of a 1970s office building in downtown Tokyo. Most of its investments are managed by outside asset-management firms.

Mr. Mizuno was educated in the U.S. and speaks fluent English, which addresses concerns among foreign investment firms that have had trouble working with GPIF.

After starting as a banker at Japan’s Sumitomo Trust and Banking Co., Ltd., Mr. Mizuno joined Coller Capital in 2003.

Coller occupies a niche in the financial world, buying stakes in private-equity funds from investors who want to cash out early. It is an opportunistic strategy that allows those with plenty of cash and long investment horizons to get good deals from others who are cash strapped or concerned about short-term performance. Such a strategy could play to the strengths of a fund like GPIF, which like most pension funds has a long time horizon.

Hiring more investment professionals to manage the fund’s ¥127 trillion pot has been a core push of Prime Minister Shinzo Abe ’s administration as it tries to make the fund a more aggressive and sophisticated investor in order to secure payouts to a mounting number of retirees. The fund manages reserves for the nation’s universal basic pension as well as that for private-sector employees.

The fund’s lack of professional asset managers has also come to the forefront in the wake of a change to the way it allocates it investments, announced last month. Under the investment overhaul. the fund cut its 60% target weighting to low-yielding domestic bonds to 35% and increased the allocation for equities. It is branching out into new asset classes such as real estate and private equity.

The GPIF is headed by its president, Takahiro Mitani, who has ultimate decision-making power under the current law, but Mr. Mizuno would be effectively in charge of overseeing important investment decisions. Rather than making investments himself, Mr. Mizuno will spend more time choosing professional fund managers to oversee portions of the fund’s investments.

Mr. Mizuno joined the GPIF in July as an adviser and a member of its investment committee, an eight-member group that advises the fund part-time. At a news conference last month, Mr. Mitani described Mr. Mizuno’s expertise in private equity as “invaluable.”

Mr. Mizuno has a bachelor’s degree from Osaka City University in Japan and a master’s in business administration from Northwestern University’s Kellogg School of Management. He also is an adviser to the Kyoto University’s Center for iPS Cell Research and Application.

This is an excellent hire for GPIF. I really like the fact that he worked at Coller Capital, a top notch fund that specializes in secondary investments and providing liquidity to private equity investors.

But Mr. Mizuno has his work cut out for him. As global pension funds flock to alternatives at the worst possible time, he will need to rely on his experience at Coller to skillfully delve into illiquid asset classes. This is no easy feat when managing over a trillion dollars.

He will also need to meet his global counterparts and ramp up his hiring, attracting and retaining talented individuals to manage traditional and alternative assets. Again, this is a lot harder than it sounds, especially for the GPIF.

In other news, the Alberta Investment Management Corporation (AIMCo) just appointed Kevin Uebelein as Chief Executive Officer:

The Board of Directors of Alberta Investment Management Corporation (AIMCo) is pleased to announce the appointment of Mr. Kevin Uebelein as Chief Executive Officer. He will assume his responsibilities on January 5, 2015, and will succeed Dr. Leo de Bever, AIMCo's first Chief Executive Officer, who led AIMCo from its establishment in 2008 to the highly regarded investment management firm it is today.

Kevin is a highly accomplished executive with an impressive career of almost three decades in investment management. Prior appointments include President and Chief Executive Officer of Pyramis Global Advisors, the institutionally-focused asset management unit of Fidelity Investments, holding assets in excess of USD 200 billion, and also the position of Global Head of Investment Solutions at Fidelity Investments. Previously, Kevin held progressively more significant positions with Prudential Financial Inc., including Head of Alternative Investments, and culminating as Chief Investment Officer for Japan, and then International operations.

Mr. Uebelein holds a Bachelor of Accounting degree from Harding University, an MBA from Rice University, and is a Chartered Financial Analyst (CFA) charterholder.

"The appointment of Mr. Uebelein as Chief Executive Officer marks the successful conclusion of a comprehensive, diligent process to identify the individual best suited to lead AIMCo through its next phase of organizational maturity. Kevin brings exceptional talent, investment acumen and a strong client orientation to the organization. We look forward to working with him in this exciting new chapter for AIMCo." says Charles Baillie, Chair, AIMCo Board of Directors.

"AIMCo is a recognized global leader in investment management, and I am excited to have the opportunity to work with this team. I am wholly committed to delivering on our mandate of superior risk-adjusted returns for our clients, and doing so within an environment of strong client engagement and excellent organizational health," says Kevin Uebelein. "I am looking forward to my relocation to Edmonton in January and to experiencing all that Alberta has to offer."

"On behalf of the AIMCo Board of Directors, I want to sincerely thank Leo for his unwavering commitment to building an organization that rivals the most accomplished of institutional investors. Leo will be with AIMCo until December 31, 2014 and will assist with our transition initiatives," says Baillie. "Leo's passion for investments is undeniable and he has built a legacy of which all Albertans can be proud. We wish him continued success and good health in the future."

I congratulate Kevin Uebelein on this appointment and look forward to talking and meeting him one day. He has big shoes to fill but I'm sure he'll do an outstanding job.

Below, Luke Ellis, president of Man Group, discusses the secrets of the world's biggest listed hedge fund. Listen carefully to this interview, it's very interesting.