World's Biggest Pension Fund Posts Record $92 Billion Gain

  • Investment result for December quarter comes amid Trump rally
  • Japan stocks surged while drop in yen boosted overseas assets

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 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.

“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 percent over the three months, matching a 15 percent gain in the Topix. Overseas stocks added 16 percent, largely due to a 13 percent drop in the yen against the greenback, the biggest such decline since 1995, which increases the value of foreign holdings when repatriated.

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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 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.

For a QuickTake on the world’s biggest pension fund, click here.

Alternative assets accounted for less than 0.1 percent of GPIF’s holdings, well below the allowable limit of 5 percent. Takahashi said last month that investments in U.S. 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.

“Yes, they had record gains, but it’s no use looking at short-term performance,” said Ayako Sera, a market strategist with Sumitomo Mitsui Trust Bank Ltd. in Tokyo. “They’ve gone through good and bad spells. There’s no point in swinging between desperation and elation.”

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