JST announces status of the University Fund, revealing a net income of 116.7 billion yen in 2023

The Japan Science and Technology Agency (JST) on July 5 announced the management status of the University Fund, revealing a net income of 116.7 billion yen in fiscal year (FY) 2023. According to the Ministry of Education, Culture, Sports, Science and Technology (MEXT), "Sufficient funds have been secured for the planned expenditure on Tohoku University (recognized as a University for International Research Excellence)." A JST representative said, "Currently, we are maintaining a low-risk investment strategy; however, we are required to transition to a higher-risk basic portfolio. This has to happen within 10 years after the start of fund management (i.e., by the end of FY2031). The amount of earnings for FY2023 was 99.34 billion yen, and the amount under management was 10,964.9 billion yen. Hence, we would like to go forward with raising our level of management."

The University Fund ultimately aims to generate 300 billion yen in annual investment income. However, during the first 10 years of operation, the Fund is to be managed on a trial basis to secure investment know-how. From FY2031 onward, the Fund will be managed with the basic portfolio indicated by MEXT (i.e., risk involving a portfolio of 65% stocks and 35% bonds). Investment income of 300 billion yen is expected to be achieved at this time. In FY2023, the Fund was managed with a composition of 65.7% global bonds, 25.7% global equities, 2.8% alternatives (e.g., unlisted companies and real estate investments), and 5.8% short-term assets (e.g., deposits), making it considerably less risky than the basic portfolio. The reason is that the original 8.9 trillion yen of the University Fund was borrowed from the Fiscal Investment and Loan Program and the government budget is 1.1 trillion yen. Therefore, the Fund has been managed to keep potential losses within 1 trillion yen even if a financial crisis similar to the 2008 collapse of Lehman Brothers were to occur.

Considering the amount of income, global fixed income was 190.2-billion-yen, global equities 774.9 billion yen, and alternatives 28.3 billion yen, for a total of 993.4 billion yen. Subtracting, from this, the fees of 14.7 billion yen, the valuation difference of 736.1 billion yen (i.e., difference between the market value at the time of acquisition and valuation) and the 125.9 billion yen decline in book value (i.e., difference from book value) in the previous fiscal year, yields 116.7 billion yen as net income. Since the net income for FY2022 was approximately 68.1 billion yen, the total amount available for utilization is approximately 180 billion yen. However, by design, the University Fund is meant to have a buffer of 300 billion yen for two years in case a situation arises where the amount of support for each fiscal year cannot be covered by investment income. Until 600 billion yen is secured, subsidies will be provided within the range of approximately one-third of the buffer plus investment profits. Hence, in this case, 60 billion yen can be used as a grant.

The profits from the University Fund's management are allocated to support Universities for International Research Excellence, as well as to support doctoral students (e.g., Research Assistant expenses for SPRING and emergent research), totaling 20 billion yen. As for doctoral student support, there is still a supplemental budget remaining, which will be gradually switched to investment income. JST plans to gradually shift to higher risk but more profitable investments by increasing the percentage of global equities and, within that, the percentage of active investments, as well as alternative investments.