World's biggest pension fund posts record $92-billion gain

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 per cent, or 10.5 trillion yen ($92 billion), in the three months ended December 31, increasing assets to 144.8 trillion yen, it said in Tokyo on Friday. Domestic equities added 4.6 trillion yen 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 per cent of its stock investments in strategies that track indexes, 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 Co. 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 per cent over the three months, matching a 15 per cent gain in the Topix. Overseas stocks added 16 per cent, largely due to a 13 per cent 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 per cent for a second quarterly loss, bringing holdings to 33 per cent of assets, as an index of Japanese government debt dropped 1.6 per cent. Foreign bonds added 8.8 per cent, accounting for 13 per cent of GPIF’s investments at the end of last year.

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

Alternative assets accounted for less than 0.1 per cent of GPIF’s holdings, well below the allowable limit of 5 per cent. 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.