World's biggest pension fund posts biggest quarterly gain in its history

Tokyo - The world’s biggest pension fund posted the biggest quarterly gain in its history as Japanese stocks surged and a plunge in the yen boosted overseas investments after Donald Trump’s election victory.

The Government Pension Investment Fund returned 8%, in the three months ended December 31, increasing assets to ¥144.8trn, it said in Tokyo on Friday.

Domestic equities added ¥4.6trn after the benchmark Topix index recorded its best quarterly performance since 2013, outweighing a loss on Japanese bond holdings. Foreign stocks and debt jumped as the yen fell the most against the dollar in more than two decades.

The Japanese retirement fund’s second straight quarterly gain is a welcome respite after it posted losses that wiped out all investment returns since overhauling its strategy in 2014 by buying more shares and cutting debt. GPIF, which has more than 80% of its stock investments in strategies that track indices, benefits when broader equity markets are rising.

“They must be breathing a sigh of relief,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo.

“It’s going the way the government envisioned, with expected inflation rates rising and a movement from bonds into stocks in the market. The results were good.”

Japanese shares returned 15% over the three months, matching a 15% gain in the Topix. Overseas stocks added 16%, largely due to a 13% drop in the yen against the greenback, the biggest such decline since 1995, which increases the value of foreign holdings when repatriated.

GPIF “invests with a long-term perspective and isn’t swayed by short-term market moves,” President Norihiro Takahashi said in a statement Friday.

The fund’s domestic bonds fell 1.1% for a second quarterly loss, bringing holdings to 33% of assets, as an index of Japanese government debt dropped 1.6%. Foreign bonds added 8.8%, accounting for 13% of GPIF’s investments at the end of last year.

Japanese stocks made up 24% of holdings, while overseas equities were 23% of assets. The target levels for GPIF’s portfolio are 35% for domestic debt, 15% for foreign bonds, and 25% each for domestic and overseas shares.

Alternative assets accounted for less than 0.1% of GPIF’s holdings, well below the allowable limit of 5%. Takahashi said last month that investments in US infrastructure were possible, but the fund has none for now, amid reports in local media that GPIF would purchase debt issued by American corporations to finance infrastructure projects.

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