World's biggest pension fund has best performance in 2 years

Tokyo - The world’s biggest pension fund posted its best annual gain in two years, as Japanese and overseas stocks rose while government bonds slid.

The Government Pension Investment Fund returned 5.9% or 7.9 trillion yen, in the year ended March 31, increasing assets to a record 144.9 trillion yen, it said in Tokyo on Friday. That’s the biggest advance since the fiscal year ended March 31, 2015, when it had its best annual performance on record.

Domestic equities added 4.6 trillion yen as the benchmark Topix index climbed 12%, outweighing a loss on foreign and domestic bond holdings. Foreign stocks rose, increasing 4.3 trillion yen.

The Japanese retirement fund’s annual gain is a welcome change from the year before when it posted its worst performance since the global financial crisis after overhauling its strategy in 2014 to buy more shares and cut debt assets. GPIF, which has more than 80% of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.

“We need to remain humble in terms of performance numbers,” GPIF President Norihiro Takahashi told reporters in Tokyo. “Our mission is to gain stable returns while maintaining as forward looking a view as possible on the market.”

Japanese shares returned 15% over the year for GPIF. Overseas stocks added 14%, while the yen gained 1.1% against the greenback, slightly cutting into the value of foreign holdings when repatriated. The S&P 500 index had risen 14% in the same period. Volatility had made foreseeing the future difficult, Takahashi said.

The fund’s domestic bonds fell 0.9%, bringing holdings to 32% of assets, as an index of Japanese government debt dropped 1.3%. Foreign bonds lost 3.2%, and accounted for 13% of GPIF’s investments as of March end.

Cash holdings increased to 8.9% from 5.1% the previous year to enable the fund to eventually invest in other assets, Takahashi said. Japanese stocks made up 23% 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 0.07% of GPIF’s holdings, well below the allowable limit of 5%.

Takahashi said in February that investments in US infrastructure were possible, but the fund has none for now. Local media had reported that GPIF would purchase debt issued by American corporations to finance infrastructure projects.

The fund also disclosed individual stock holdings and the issuers of the bonds that it held as of March 2017, a practice started in July 2016. GPIF’s biggest equity stakes were in Toyota and Mitsubishi UFJ Financial in Tokyo and Apple. outside Japan. The fund’s largest debt holdings included Japanese government bonds and US Treasuries.

“Fiscal year 2016’s performance results have seen positive returns on an annual basis due to a rise in both domestic and foreign stocks,” Takahashi said in a statement.

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