World’s Largest Pension Posts Record-Breaking Quarter

Japan’s Government Pension Investment Fund (GPIF) — the world’s largest pension fund — posted a $92 billion gain in the 4th quarter of 2016, fund officials said on Thursday.

The gain — 8 percent — is the largest quarterly return in the history of Japanese pension investing, in terms of dollar amount.

And it comes at a good time: in 2015 and 2016, the GPIF suffered several poor quarters and it retooled its portfolio and increased exposure to equities.

From Bloomberg:

The Government Pension Investment Fund returned 8 percent, or 10.5 trillion yen ($92 billion), in the three months ended Dec. 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 percent of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.

[…]

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

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

 Photo by Ville Miettinen via FLickr CC License