The gigantic 10 trillion ($ 91.1 billion) university endowment fund that Japan plans to launch in March to reverse a downward trend in the country’s top scientific research will also see the emergence of US-style endowment funds as Key component of Japanese university finances, government officials say.
The goal is more than just managing the 10 trillion yen the government has pledged for the fund, said Sho Ito, the Tokyo-based bureaucrat who oversees the program as deputy director of the science, technology and innovation bureau of the cabinet office is the last interview. “We want to change Japanese universities and we also want to change (Japan’s) investment culture,” he said.
The fund – managed by Japan Science and Technology, a funding agency modeled on the US National Science Foundation – will seek to generate real annual returns of at least 3%, or $ 3 billion per year, to a selected Japan’s top research universities will be distributed to Japan’s top research universities in the form of matching funds for money they raise for their own foundations, said Takahiro Ueyama, a Tokyo-based executive member of the Cabinet Office’s Science, Technology and Innovation Council – chaired by Prime Minister Yoshihide Suga.
Legislative changes, due to take effect after the next regular session of the Japanese parliament in January, will create the legal basis for national universities in Japan to set up endowment funds with the operational capabilities of their counterparts in the US and Europe, Ueyama said. Over the past 10 to 15 years, a number of universities have set up funds to accept donations, but they operated under significant restrictions and made only marginal contributions to their sponsors’ finances, he said.
The University Endowment Fund’s plan will effectively apply more broadly the formula the Singapore government has used to expedite the establishment of endowment funds in universities there, led by the National University of Singapore, Ueyama said. With a government policy that puts Singapore universities at $ 1.50 for every $ 1 they raise from donations or other sources, the NIS currently has endowment assets of $ 4.8 billion – roughly coincidentally as big as the foundation’s fortune at Harvard University in 1990 when Jack Meyer took over the helm of Harvard Management Co. By the time Mr. Meyer left 15 years later, the foundation had grown to $ 25.9 billion through investment gains and ongoing donations. At the end of the fiscal year on June 30, 2020, Harvard’s endowment remained the largest in the world at $ 41.9 billion.
“That’s the plan,” said Mr. Ueyama. The program is designed not only to shower universities with money, but to help them restructure their finances and better enable beneficiaries to maintain the high levels of research required to be on par with world-class universities around the world, added he added.
The final selections have yet to be made, and the government is developing requirements – including targets for increasing their foundations – that universities must accept in order to capitalize on the investment returns from the huge endowment fund. Current plans include choosing between four and eight top research institutes, Ueyama said.
In five to ten years, these leading Japanese research universities should be able to showcase their own multi-billion dollar endowment funds, Ueyama said.
For now, Ito said, work is continuing on the establishment of the University Endowment Fund, with a government panel of experts aiming to reach conclusions on the fund’s payout ratio and risk tolerance – including the composition of the fund reference portfolio – by the end of July.
The government committee will not decide on the fund’s asset allocation, Ito said. Instead, the Japan Science and Technology Agency’s investment management team will address this issue in August, with investments scheduled to begin in March.
With the election of Masakazu Kita – Managing Executive Officer at Norinchukin Bank, one of Japan’s most experienced investors in alternative asset classes – as Chief Investment Officer of the endowment fund, Mr. Ito., An important step has recently been taken towards starting investment activities.
A Tokyo-based investment advisor hailed the choice of the seasoned alternative investor as valuable expertise in a process that he believes has been dominated by people with little experience in managing portfolios.
Meanwhile, the benchmark portfolios of leading overseas institutional investors with whom the government’s committee of experts has spoken or investigated over the past few months have stock allocations well above the 50 percent target set by Japan’s distinguished wealthy owner of $ 177.7 trillion expensive Government Pension Investment Fund, Tokyo. Singapore’s GIC Corp. For example, with an estimated net worth of more than $ 400 billion, has a 65% equity weighting, while two large sovereign wealth funds – the $ 77 billion, the Alaska Permanent Fund based in Juneau, and the NZ $ 58.6 billion , $ 7 billion) The Auckland-based New Zealand Superannuation Fund – both have an 80% equity allocation target.
