World’s Biggest Pension Fund Adds $23 Billion as Stocks Rebound

(Bloomberg) -- The world’s biggest pension fund saw returns rebound last quarter with foreign stocks generating the biggest gain among its assets.

Japan’s Government Pension Investment Fund returned 1.7 percent, or 2.6 trillion yen ($23 billion), in the three months ended June 30, with assets totaling 158.6 trillion yen, it said in Tokyo on Friday. Foreign stocks were the fund’s best performing investment, adding 2 trillion yen, followed by a 420 billion yen increase in domestic shares. The percent of total assets allocated to overseas stocks reached a record high.

The return puts GPIF back on track after a January-March loss halted six quarters of gains. Japanese and U.S. stocks found their footing in April after a rocky start to the year as investors factored in the risk of a global trade war. A stronger dollar also helped the fund amid expectations the Federal Reserve will keep raising rates while the Bank of Japan holds them below zero percent.

World’s Biggest Pension Fund Adds $23 Billion as Stocks Rebound

“The GPIF’s performance is basically swayed by the performance in stocks and currencies,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo. “Pension funds are managed over a long time span, so we should look at the GPIF’s long-term performance trend rather than quarterly fluctuations.”

GPIF investment income in April-JuneReturn 
Domestic bonds61 bln yen0.1%
Domestic stocks420 bln yen1%
Foreign bonds134 bln yen 0.6%
Foreign stocks2 trln yen 5.2%

During the April-June period, the Topix index gained 0.9 percent, while yields on benchmark 10-year Japanese government bonds fell 1.5 basis points to 0.03 percent. The MSCI World Index of global stocks rose 1.1 percent and shares of Apple Inc., the GPIF’s biggest equity stakes outside Japan in fiscal 2017, rose 10 percent in the same period. Japan’s currency weakened 4 percent against the dollar and U.S. Treasuries returned 0.1 percent on the quarter.

The GPIF doubled its holdings in stocks and cut its allocation of bonds as part of a strategy revamp that started in October 2014. Before the shift in strategy, half the fund was invested in Japanese bonds.

 GPIF holdings by asset classApril-June
Domestic bonds27.1%
Domestic stocks25.6%
Foreign bonds15.3%
Foreign stocks25.3%
Short-term assets6.7%

The GPIF has a general target to keep 25 percent of its basic portfolio in domestic stocks and 25 percent in overseas shares. The permissible range of deviation is 9 percent for local equities and 8 percent for stocks abroad.

Alternative assets accounted for 0.17 percent of GPIF holdings, below the allowable limit of 5 percent.

“The stock markets were supported by good economic indicators and solid corporate earnings at home and abroad as well as U.S. economic stimulus, while they were weighed by uncertainties over U.S. trade policy toward the quarter-end,” GPIF President Norihiro Takahashi said in a statement on Friday.

©2018 Bloomberg L.P.