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Nihon University Fund (JUF) is poised to enter a new phase of asset allocation focused on aggressive and strategic investments, said its co-chief investment officer. asian investors.
The 10 trillion yen ($70 billion) university fund began investing in March 2022, expanding beyond its initial focus on global government bonds and passive equity investments.
JUF Naoya Sugimoto
“As the fund’s asset allocation evolves and remaining capital is leveraged, we are gradually moving from passive investing to sector-specific active investing,” said Co-Chief Investment Officer and Global said Naoya Sugimoto, Head of Investment Department. A technical agency that manages the fund.
The purpose of JUF is to secure long-term and stable funding for Japanese universities that aim to improve world-class research results.
According to its 2022 fiscal year report, as of March 2023, the end of JUF’s fiscal year (FY2022), JUF had over 2.7 trillion yen ($19.9 billion) in dry cash and other short-term assets. It is maintained as a powder.
When asked about the current level of unmanaged funds, Mr. Sugimoto said that during the fund’s launch period, JUF only discloses investment details and portfolio updates in its annual report to prevent unnecessary market impact. Then he explained.
simple start
JUF has set the initial investment period to be two years, ending in March of this year. At this early stage, the focus has been on creating a simple portfolio focused on developed market government bonds, followed by adding stocks.
According to Sugimoto, this approach was also defensive due to downside risks such as those seen in the public market in 2022. Therefore, the portfolio was initially constructed conservatively with respect to a reference portfolio consisting of 65% global bonds and 35% global equities.
Although we are proceeding with portfolio construction in stages to diversify investment timing, JUF will continue to aim for more aggressive investment and overall optimization. Absolute returns and downside risk management are important considerations.
JUF conducts passive beta management internally, including ETFs and derivatives. The fixed income division will also be responsible for liquidity management, including currency hedging, according to the co-chief information officer.
The firm is seeking an external active manager to invest in emerging market debt. Beyond this mission, JUF also solicits proposals for active equities in the United States and Japan, and active bonds in Japan. It is also considering entering U.S. high-yield corporate bonds and U.S. investment-grade corporate bonds.
Increase in alternatives
As of FY2022, JUF holds 5.4 trillion yen, or 54.6% of its assets under management, in bonds. Invested 1.7 trillion yen (17.2%) in stocks. The alternative plan is 64.3 billion yen (0.6%).
As fund managers are selected and begin attracting capital, the share of equities as well as alternative investments will gradually increase.
Also read: Nihon University Fund adds stocks and alternatives to portfolio
In the alternative, private equity investments include private debt, while real assets such as real estate and infrastructure are managed as a separate asset class.
“We have a team dedicated to alternative investments. We are reaching our goals in terms of reaching our target overall internal staff,” Sugimoto said.
As of the end of March, JUF has a total of 52 staff members, including 44 in charge of fund management and 8 in charge of investment risk management. Since then, the size of the staff has increased, Sugimoto elaborated.
further obligations
As the initial investment period draws to a close, JUF will increasingly issue external mandates for asset managers, particularly as active and alternative mandates increase.
Mr. Sugimoto said, “There will be a public bidding process regarding the delegation, and we will continue to solicit proposals in this regard.”
JUF aims to fully establish a policy portfolio by FY2031, which is 10 years since the foundation’s establishment.
After the fund’s inception, the target return will be over 4.49%, with a long-term dividend target of 3% and a long-term expected inflation rate of 1.49%.
Mr. Sugimoto explained that as a milestone goal, JUF aims to achieve an operating income of 300 billion yen, equivalent to 3% of its capital, by the end of fiscal 2026.
Mr. Naoya Sugimoto of Nihon University Foundation said, asian investorsEditorial Advisory Board.
Also read: asian investors Announcement of Editorial Advisory Committee
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