Japan’s $ 90 billion university fund struggles to attract talent despite its size


Japan’s university endowment, the world’s largest with $ 90 billion in capital, only managed to hire a single fund manager within months of launch, despite explicit backing from new Prime Minister Fumio Kishida .

Created in a desperate attempt to make Japanese scientific research competitive on a global scale, the fund’s failure to attract investment management talent has been revealed by its investment manager Masakazu Kita – so far the only professional of the registered fund.

In an interview with the Financial Times, Kita admitted that the fund’s biggest challenge would be attracting the best investment professionals given that its compensation levels were well below international standards.

“It is true that we are trying to bring together talent, but the reality is that I am the only one hired so far,” said Kita, former financial manager of Japanese agricultural bank Norinchukin Bank.

“For hiring, we want to set our compensation at a competitive level to a certain extent, but we also hope that [the prospective candidate] sympathize with the purpose of this fund, ”Kita added.

Announced in March, the fund marks a clear break with the traditional Japanese approach to financing innovation. It will be endowed with 4.5 billion yen ($ 40 billion) in state funding when it begins investing from next March, and is expected to reach 10 billion yen in “the near future” thanks to the fundraising from universities and additional government debt.

The fund is mandated to offer an annual payout rate of 3 percent, from which it will support a wide range of scientific research with an emphasis on work currently restricted by conservative academic institutions. The idea behind the endowment is to convince young Japanese scientists that they can pursue pioneering projects in a new, less risk-averse funding regime.

However, concerns remain as to whether the fund itself will be managed too conservatively to generate something approaching the type of return generated by similar much smaller funds. Harvard University’s $ 42 billion endowment fund, for example, has gained an average of 11% per year since its inception.

It will allocate 65% of its investments to Japanese and foreign stocks and 35% to global bonds, with its portfolio to include alternative assets, such as private equity and real estate.

Earlier this month, the fund, which will be managed by the Japan Science and Technology Agency (JST) of the Ministry of Education, appointed five members of its investment committee, including Hiroshi Nakaso, the former vice-governor of the Bank of Japan; and Landis Zimmerman, director of investments at the Howard Hughes Medical Institute.

Government officials say the base salaries of the fund’s investment professionals will be comparable to levels at Japan’s Government Pension Investment Fund, the world’s largest pension fund whose chief investment officer manages $ 1.7 billion and earns about $ 270,000 per year.

While GPIF’s fund managers may earn more than its CIO, the levels are still far below global standards, with Harvard University’s endowment investment manager earning around $ 5 million.

“It’s very difficult, especially in Japan. JST is a public institution and the salary is not that flexible, but if we want to hire very good talent from the financial sector, we have to set a competitive salary for them, ”said Sho Ito, deputy director of the Cabinet Office of Science. . , Technology and innovation.


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