KKR urges Japan's pension fund to invest in private equity as reforms loom

TOKYO Fri May 23, 2014 5:34am EDT

TOKYO May 23 (Reuters) - KKR & Co is calling on Japan's public pension fund, the world's largest, to start investing in private equity funds to boost returns and encourage other institutional investors to seek higher-yielding alternative investments.

KKR Japan CEO Hirofumi Hirano said on Friday he would like to team up with the Government Pension Investment Fund (GPIF) to invest in Japanese companies directly, something that the $1.26 trillion fund has never attempted.

"If GPIF starts investing in private equities, that would lead the flow of money from private pension funds," he told reporters.

Hirano's remarks come at a time when Japan's ruling Liberal Democratic Party is preparing legislation to overhaul the governance of GPIF and encourage it to move out of the kind of passive, low-risk investment in yen bonds that it has followed for the past decade.

KKR last year raised a record $6 billion for its Asian II fund, which invests in Asian companies, but none of the funding came from pensions in Japan, Hirano said.

GPIF's target return is 1.6 percent over the nominal wage, while private equity funds typically offer more than 10 percent returns.

"Some 40 percent of our Asian II fund came from pension funds overseas. I wish there had been money from Japanese pension funds as well," Hirano told a group of reporters.

Tokihiko Shimizu, director-general of GPIF's research department, said last month that the public fund is in talks with several global private equity investors to increase its exposure to alternative assets after reaching an agreement in February to invest in infrastructure.

(Reporting by Junko Fujita)

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