RI Europe 2017: GPIF’s Mizuno says asset managers need to be “best in class” on governance

Leading investor says managers will receive smaller fees

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The head of investments at the world’s largest asset owner, Japan’s Government Pension Investment Fund, has warned asset managers that will receive “smaller cheques” if they don’t perform on corporate governance.

Hiromichi Mizuno, Executive Managing Director and Chief Investment Officer of the giant fund, in a keynote interview at the RI Europe 2017 event in London today, says his aim is to try to change managers’ attitudes to ESG. To win business from the GPIF asset managers needed to be best in class in terms of their own governance, he told delegates.

“I’m not very satisified so far” with asset managers on governance, he said in an onstage discussion with Responsible Investor’s Managing Editor Hugh Wheelan.

In a stark warning to fund managers, he said: “You will recieve smaller cheques. Some asset managers received smaller cheques this year.”

And he also said that he expected asset managers to engage on ESG issues – though he refuses to specifiy on what issues, arguing it is the asset managers with the talent and resources to do what their client wants (“as the biggest customer in the industry”).

It wasn’t his job to tell his providers how to do their job, in the same way it’s up to Apple to design the iPhone.Ultimately, it was up to managers to justiy their fees and salary. Mizuno pointed out he is “very very keen” to see new ideas from asset managers and even new business models.

“Some asset managers received smaller cheques this year.”

Mizuno also tackled index providers, and cited the example of pressure the GPIF had received about holdings in cluster munitions. He said it is unlawful for the GPIF to take a company out of an index, posing the question as to why the index provider would include such a stock in the first place. It meant that index providers could be more influential than even the GPIF, he said.

The fund currently has a tender out for ESG indices – to which Mizuno said it would devote a “meaningful” amount of assets. He’s using his weight to demand that the ESG index vendors disclose their methodology.

The session ended with a question about President Donald Trump’s withrawal from the Paris accord. Mizuno tackled this by saying: “Do you think what Trump is saying is sustainable over 25 years?”