World’s Largest Pension May Announce Largest Annual Loss Since Financial Crisis

This summer, Japan’s Government Pension Investment Fund will release its FY 2015-16 annual results.

The report is likely to contain some bad news: an annual loss of about $54 billion, possibly the largest loss for the pension fund since the financial crisis.

More from Bloomberg:

The $1.3 trillion Government Pension Investment Fund will on July 29 announce what may be its worst annual loss since the global financial crisis — about three weeks later than usual and after an upper house poll that must be held before July 25. SMBC Nikko Securities Inc. estimates the decline for the fiscal year ended March at as much as 6 trillion yen ($54 billion).

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In 2014, GPIF announced a shift from bonds into stocks as it sought higher returns for Japan’s rapidly-aging population and assets that would do better in an inflationary environment. That initially worked well, with the fund posting a 12 percent return in the year through March 2015.

Since then, asset managers have struggled amid a global downturn in equities. Japan’s Topix index is down 24 percent from an August peak. GPIF lost 511 billion yen in the nine months through December, its quarterly results show. SMBC Nikko estimates the fund slumped by 5 trillion yen in the three months through March, as the Topix fell 13 percent and the yen strengthened.

“Having the announcement so late can only be out of a desire to reveal the losses after even a delayed House of Councillors election,” said Michael Cucek, an adjunct fellow at Temple University’s Japan campus. The extent of the damage it will cause to the administration is unclear, he said.

The GPIF oversees $1.2 trillion in assets.

Photo by Ville Miettinen via Flickr CC License