Japanese pension fund starts investing in nation's startups for first time

Japan's Government Pension Investment Fund (GPIF), one of the world's largest institutional investors, began investing in Japanese startups in order to give the sector a boost, Nikkei mentioned in its report.

The fund will plough $1.45 trillion in the startup economy, in an effort to grow ventures.

So far Japanese startups have lagged behind those in the US, China and other countries, observers say.

Mitsubishi UFJ Trust and Banking, which is responsible for managing some of GPIF's funds, has signed an agreement to invest in a startup fund run by Globis Capital Partners at the end of May.

​​Back home, Pension Fund Regulatory and Development Authority (PFRDA), India is unlikely to rush its money into startups anytime soon. 

The authority had last year permitted fund managers to invest in initial public offerings (IPOs) of companies with a minimum issue size of Rs 500 crore. 

“The biggest challenge for us is that we need daily NAV (net asset value) on all investments, like mutual funds, and that may not be possible with startups. Besides, there are challenges related to valuation,” PFRDA chairman had said. 

GPIF and Globis 

Globis, launched in 1996, calls itself Japan's first full-scale "hands on" venture capital firm. Its investments include online flea-market operator Mercari and eyewear retailer Visionary.

Globis has already pulled in 50 billion yen ($370 million) in investor money for the fund and aims to expand its size to 70 billion yen by the end of the year as it looks for investment opportunities in sectors such as manufacturing, medical services and construction.

GPIF had more than 196 trillion yen, or $1.45 trillion, in assets under management as of March 31.

Its initiative is aimed at changing Japan's startup investment environment, which has been dominated by banks and business corporations. In the US, 32% of venture capital came from pension funds last year, while the corresponding ratio for Japan was just 3%. Venture capital funds in Japan remain small and have been unable to meet the funding needs of startups.

The lack of capital has been blamed for the fact that there are only six unicorns in Japan, compared with more than 600 in the US. A unicorn refers to a startup company worth $1 billion or more.

If other pension funds follow GPIF's lead, it could facilitate growth of more startups and complement Prime Minister Fumio Kishida's vision of new capitalism, which calls for boosting the startup sector in Japan.