GPIF Returns 3.42% in Second Fiscal Quarter

Stocks drive most of the Japanese mega-fund’s gains.

The world’s largest pension fund gained 3.42% in its second fiscal quarter, valuing it at $1.46 trillion.

Japan’s Government Pension Investment Fund’s performance was dominated by foreign and domestic equities, accounting for a combined ¥5.3 trillion of the ¥5.4 trillion increase. The rest of the returns came from foreign bonds, which caused an upswing in yields to 13 basis points at the period ended September 30, from the previous quarter’s three basis points.

The fund’s president, Nohiro Takahashi, backed the stock returns, adding that “good domestic and overseas economic indicators as a whole and solid corporate performance supported the market.” He also noted the yen’s depreciation during the quarter due to the “backdrop of the expansion of domestic and foreign interest rate differentials” helped raise the assets of the fund’s overseas stocks and bonds, which account for more than 40% of the  plan’s assets.

The quarter also marked the first time the Government Pension Investment Fund’s foreign and domestic stock allocation was higher than domestic bonds.

The organization has been lowering its bond weighting in recent months, as a change in its policy asset allocation has allowed it to decrease the holdings more than was previously acceptable. The last major asset reform, announced in October 2014, had a 35% target for domestic bonds, with a 10 percentage point range to go higher or lower. Toward the end of the last quarter, however, it changed its tune, as the total weighting for bonds and cash was at 33.84%.

The fund’s current operating guidelines will also let it put five percentage points of its portfolio toward alternatives such as private equity, real estate, and infrastructure.

Japan’s asset mix for the quarter was 25.70% foreign equities, 25.65% domestic equities, 25.26% domestic bonds, 14.81% foreign bonds, and 8.58% short-term assets (which is currently just cash).

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