Market MovesNovember 10, 2020

Japan’s Government Pension Investment Fund Returns 3.05% in Q2

World’s largest pension fund grows to $1.62 trillion with $47.64 billion quarterly gain and is on pace for its best year ever.

Reported by Michael Katz

Japan’s Government Pension Investment Fund (GPIF) posted an investment return of 3.05% gross of fees during the second quarter of fiscal year 2020 to raise the asset value of the world’s largest pension fund to 167.536 trillion yen, or $1.62 trillion.

The fund is now $440 billion larger than the world’s second largest pension fund, Norway’s Government Pension Fund Global (GPFG), which currently has an asset value of roughly $1.18 trillion. To put that in perspective, the gap between the two is $20 billion more than the entire asset value of the largest pension fund in the US, the California Public Employees’ Retirement System (CalPERS), which is worth about $420 billion.

Foreign equities were the top performing asset class for the Japanese giant, returning 5.99%, or $25.89 billion, and just ahead of its benchmark, which returned 5.97% during the quarter. Domestic equities returned 4.93%, or $18.96 billion, but fell short of its benchmark’s performance of 5.17%. Foreign bonds returned 0.64%, or $2.01 billion, also below its benchmark’s 0.81% return, while domestic bonds returned 0.19%, or $730 million, just beating its benchmark’s return of 0.17%.

For the first half of 2020, the fund had a total investment return of 11.59%, or $168.45 billion. Foreign equities were also the top performing asset class during the first two quarters, returning 27.18%, or $98.59 billion, and surpassing its benchmark’s return of 27.11%, while domestic equities returned 16.42%, or $57.36 billion during the first half, but missed the benchmark’s return of 17%.

Foreign bonds returned 4.11% during the first half, or $13.01 billion, beating its benchmark’s 3.43% return, while domestic bonds lost 0.27%, or $600 million, but still beat its benchmark, which was down 0.32%.

The strong performance during the first half of the year was a sharp turnaround from fiscal year 2019, during which the fund lost 5.2% due to the COVID-19 pandemic, and puts it on pace to be the fund’s best year ever, topping its record high return of 12.27% in 2014.

The asset allocation of the fund’s portfolio is 26.61% in domestic bonds, 25.88% in foreign equities, 24.06% in domestic equities, and 23.46% in foreign bonds. The figures are rounded off, so the sum of each does not necessarily equal 100%.