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Survey on Compensation Structure (Incentive Scheme) of GPIF Asset Managers

July 8, 2019

  GPIF entrusted "Survey on Compensation Structure (Incentive Scheme) of GPIF Asset Managers" to Mercer Japan Limited (*) as one of GPIF's research projects in 2018 fiscal year.
  GPIF implemented the survey from the point of view whether compensation structures of GPIF asset managers have incentive scheme avoiding short-termism and promoting a long-term return expected by asset owners.
  GPIF introduced the new performance-based fee structure and multi-year contracts with our active managers in 2018 fiscal year, to strengthen the alignment of interest between GPIF and its asset managers and to achieve sustainable and stable investment returns from active investment. GPIF also believes that compensation structures is one of useful measures to enhance alignment for pursuing long-term partnership with the asset managers.

＜Summary of the Survey＞
  • Almost all the asset managers have effective compensation structure to avoid short-termism.
  • From the perspective of promoting long-term return, leading asset managers are taken to their organizational context, history, etc. into the compensation structure.
  • It could be concluded that asset managers are classified into: strategic use of compensation structure and non-strategic use of compensation structure. Most of Japanese asset managers do not use compensation structure strategically, such as their compensation is determined based on the same scheme of parent company or other subsidiaries (banks, securities and insurances).
  • GPIF demands that its asset managers integrate ESG factors into the investment process and proactively engage with investee companies on critical ESG issues. However, very limited number of asset managers have appropriate compensation structures for their ESG Head in line with his/her roll and responsibility.

  The compensation structures could be considered to reflect asset managers' investment philosophy as well as their shared value and beliefs such as corporate culture. Therefore, it is also one of the engagement themes in corporate governance. GPIF will utilize the results of the survey for engagement with asset managers seeking the best practice including transparency and for evaluating them.

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(*) Mercer's more than 23,000 employees are based in 44 countries, about 180 cities, and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy, and people.

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