After Portfolio Overhaul, World’s Largest Pension Gets Shelled In Worst Quarter Since 2008

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Japan’s Government Pension Investment Fund, the largest pension fund in the world, overhauled its portfolio last year to double down on equities and distance itself from bonds.

The initial results were strong: the pension fund’s new equity exposure helped propel it toward a record annual return of 12.3 percent in fiscal year 2014-15.

Now, the GPIF has set a less impressive record: the fund returned -5.6 percent in the third quarter of 2015, a $64 billion loss marking its worst quarter since 2008.

From Bloomberg:

Japan’s giant pension manager is unrepentant after a push into equities saw the fund post its worst quarterly result since at least 2008.

There’s no reason to doubt the Government Pension Investment Fund’s investment strategy, officials said on Monday in Tokyo as they unveiled a 7.9 trillion yen loss for the three months through September. The slump was GPIF’s first negative return after revamping allocations last October, when it doubled holdings of Japanese and foreign shares.

“They will see some criticism for this. But that’s more of an issue of financial literacy,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust in Tokyo. “The liabilities of public pensions have an extremely long duration, so it’s best not to carve it up into three-month periods. However, from a long-term perspective, it’s necessary to continue monitoring whether the timing of last year’s allocation was good or not.”

GPIF lost 5.6 percent last quarter as China’s yuan devaluation and concern about the potential impact if the Federal Reserve raises interest rates roiled global equity markets. That’s the biggest drop in comparable data starting from April 2008. The pension manager’s Japan equity investments slid 13 percent, the same retreat posted by the Topix index, and foreign stock holdings fell 11 percent. The fund lost 241 billion yen on overseas debt, while Japanese bonds handed it a 302 billion yen gain.

The GPIF manages $1.1 trillion in assets.


Photo by Ville Miettinen via Flickr CC License

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