The giant 10,000 billion yen ($ 91.1 billion) university endowment fund that Japan plans to launch in March to reverse the declining trend in domestic production of advanced university research will also foster the emergence of American-style endowment funds as a key part of the university’s finances, according to government officials.
The ambition goes beyond simply managing the 10 trillion yen pledged by the government for the fund, said Sho Ito, the Tokyo-based bureaucrat in charge of the program as deputy director of the Bureau of Science, Cabinet Office Technology and Innovation, in a recent interview. “We want to change Japanese universities and we also want to change (Japan’s) investment culture,” he said.
The fund – which will be managed by Japan Science and Technology, a funding agency modeled on the United States’ National Science Foundation – will seek to generate actual annual returns of at least 3% or $ 3 billion per year, to distribute to a selected group. top Japanese research universities as matching funds for the money they raise for their own endowments, said Takahiro Ueyama, Tokyo-based executive member of the Cabinet Office’s Council for Science, Technology and Innovation – chaired by Prime Minister Yoshihide Suga.
Legislative changes to be enacted after the start of the next ordinary session of the Japanese parliament in January will lay the legal foundation for Japanese national universities to build endowment funds with the operational capacities of their counterparts in the United States and Europe. , said Ueyama. Over the past 10 to 15 years, a number of universities have set up funds to accept donations, but they have operated under considerable strain and have made only marginal contributions to the finances of their sponsors, a he declared.
The University Endowment Fund plan will effectively apply, on a larger scale, the formula that the Singapore government has used to accelerate the building of endowment funds in higher education institutions, led by the National University of Singapore. said Mr. Ueyama. With the help of a government policy granting universities in Singapore $ 1.50 for every dollar raised through donations or other sources, NUS currently has an endowment of $ 4.8 billion – coincidentally , roughly the size of the Harvard University endowment in 1990 when Jack Meyer took the helm at Harvard Management Co. When Mr. Meyer left 15 years later, investment gains and continued giving had swelled the size of the endowment at $ 25.9 billion. At the close of its fiscal year on June 30, 2020, Harvard’s endowment remained the largest in the world at $ 41.9 billion.
“This is the plan,” Ueyama said. More than just paying universities money, the program is designed to help them restructure their finances, leaving grantees in a better position to maintain the high level of research needed to compete with the best universities in the world, he said. he adds.
Final selections have yet to be made and the government is developing requirements – including targets for increasing their endowments – that universities will have to agree to to tap into the investment gains of the giant endowment fund. Current plans call for four to eight top research institutions to be chosen, Ueyama said.
Within five to ten years, Japan’s leading research universities should be able to boast of their own multibillion-dollar endowment funds, Ueyama said.
For now, Ito said, work on launching the university endowment fund continues, with a committee of government experts seeking to draw conclusions by the end of July on the fund’s payout ratio and its outcomes. risk tolerance levels, including the composition of the fund benchmark. wallet.
The government committee will not decide on the asset allocation of the fund, Ito said. Instead, the investment management team set up by the Japan Science and Technology Agency will begin to address this topic in August, with investments set to begin in March.
A major step towards the start of investment operations was recently taken with the selection on June 1 of Masakazu Kita – Managing Director of Norinchukin Bank, one of Japan’s most experienced investors in alternative asset classes – as that endowment fund investment manager, Mr. Ito is noted.
A Tokyo-based investment consultant, who declined to be named, hailed the selection of the seasoned alternative investor as a valuable injection of expertise into a process which he argued has so far been dominated by people with little experience in portfolio management.
Meanwhile, the benchmark portfolios of major foreign institutional investors with whom the government panel of experts have spoken or studied in recent months all show equity allocations significantly above the target of 50% of the government. Japan’s most prominent asset owner, the 177.7 trillion yen government pension investment fund, Tokyo. For example, the benchmark portfolio of GIC Corp. of Singapore, with assets estimated at over $ 400 billion, has a 65% equity weighting while two large sovereign wealth funds – the Juneau-based $ 77 billion Alaska Permanent Fund and the NZ $ 58.6 billion ($ 41.7 billion) Auckland-based New Zealand pension fund – both have 80% equity allocation targets.
