World’s Largest Pension Rides Stocks to Strong 4th Quarter

Japan’s Government Pension Investment Fund (GPIF) posted a 3.6 percent return in the 4^th quarter of 2015, making it the fund’s best quarter of the year.

The boon is welcome after a 3^rd quarter in which the fund posted its worst return since 2008.

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The results provide some respite for Prime Minister Shinzo Abe, who oversaw the fund’s doubling of its allocation to stocks, after GPIF had its worst loss in comparable data starting from April 2008 in the previous three months. They came as Japanese and global equities rebounded at the end of last year from a slump following China’s shock currency devaluation. Still, the gains will probably prove fleeting as share markets resumed their downturn in 2016, an election year in Tokyo.

“The return from Japanese stocks was a little bigger than expected. They must have been adding to holdings,” said Shingo Ide, chief equity strategist at NLI Research Institute in Tokyo. Still, “Japan’s investing environment is getting worse. GPIF is quickly blamed for losses and they might find it hard to take risk.”

GPIF held 38 percent of assets in Japanese debt as of Dec. 31 and 23 percent in the nation’s equities, according to the statement. The fund had 14 percent of holdings in foreign bonds and 23 percent in overseas stocks. Alternative investments made up 0.04 percent. GPIF targets 25 percent each for shares at home and abroad, 35 percent for local bonds and 15 percent for overseas debt.

Most of GPIF’s equity holdings are passive, which means performance tends to track benchmark gauges. The Topix index of Japanese stocks had a total return of 9.8 percent in the quarter ended December, including reinvested dividends, while GPIF posted a 9.9 percent gain on local shares.

GPIF oversees $1.3 trillion in assets and is the world’s largest pension fund by AUM.

Photo by Ville Miettinen via FLickr CC License