(Bloomberg) -- The world’s biggest pension fund posted a gain for a third consecutive quarter, with Japanese stocks providing the best return among assets amid a global shift to shares in September.
Japan’s Government Pension Investment Fund returned 1.1%, or 1.8 trillion yen ($17 billion), in the quarter ended Sept. 30, with assets totaling 161.8 trillion yen, it said Friday in Tokyo. Domestic stocks were the fund’s best performing investment, gaining 3.3%, while foreign equities added 0.1%. The return was 1.2% for overseas bonds and 0.3% for Japanese debt.
The GPIF’s results were the first since the fund announced last month that it would give itself leeway to buy more of bonds from outside its home market by considering currency-hedged foreign bonds as part of its domestic debt portfolio. The move gives the fund more options as domestic yields remain low, GPIF President Norihiro Takahashi said in an interview in Tokyo on Oct. 9.
The GPIF’s Takahashi said in a statement Friday that the fund decided to not disclose the allocation breakdown, amounts and investment income for each asset class this fiscal year as it is reviewing the composition of its basic portfolio. It was the first time the details were not released for quarterly results, the fund confirmed.
“Back when the GPIF last set the portfolio, markets were watching the GPIF like a hawk about what asset class they might be tweaking,” said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd. “The GPIF knows it has significant influence, so it may be a move to try to minimize the market impact.”
The GPIF has a general target to keep 25% of its basic portfolio in domestic stocks and 25% in overseas shares. The permissible range of deviation is 9% for local equities and 8% for stocks abroad. The target is 35% for domestic bonds and 15% for foreign debt, with a permissible deviation of 10% and 4%, respectively.
| July-Sept Return | |
| Domestic bonds | +0.3% |
| Domestic stocks | +3.3% |
| Foreign bonds | +1.2% |
| Foreign stocks | +0.1% |
During the July-September quarter, the MSCI All-Country World Index of global stocks fell 0.5% and the S&P 500 Index gained 1.2%, while the Topix index advanced 2.4%. Yields on 10-year U.S. Treasuries fell 34 basis points in the period, while benchmark Japanese government bonds yields dropped 5 basis points. Japan’s currency weakened 0.2% against the dollar and gained 4.1% against the euro.
Equities rebounded in September from an earlier slump in the third calendar quarter, as optimism over progress in U.S.-China trade negotiations and an interest-rate cut by the Federal Reserve helped restore investor confidence. Japan’s Topix index outperformed the S&P 500 index for the first quarter in almost two years amid a global shift to shares with low valuations.
”Rates have gone low globally, so it’ll be important to watch how the GPIF allocates to bonds, especially the currency-hedged foreign bonds,” Pictet’s Matsumoto said. “Another thing to keep an eye is if they will add any new class, like private equity or other alternative instruments. That could mean business opportunity for relevant players in the market.”
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