World’s Largest Pension Fund GPIF Has $17 Billion Gain

(Bloomberg) -- The world’s biggest pension fund had a 1.8 trillion yen ($17 billion) gain for its sixth straight quarter of positive returns, thanks to the strong performance of Japanese stocks. 

Japan’s Government Pension Investment Fund gained 0.98% in the three months ended September, with assets climbing to a record 194.1 trillion yen, the fund said in Tokyo. 

Equities in Japan, which was briefly home to the world’s best-performing stock market during the period, returned 5.4%, while overseas stocks fell 0.8%. Overseas debt lost 0.9% and Japanese bonds added 0.1%. 

“Foreign stock markets declined slightly amid awareness of the shift to accommodative monetary policies in some major countries, while the domestic stock market rose sharply due to the normalization of economic activities due to Covid vaccines and expectations for future economic policies,” Masataka Miyazono, the fund’s president, said in a statement.

The Topix index rose 4.5% for the period, during which it touched the highest level in more than three decades following the resignation of former Prime Minister Yoshihide Suga. The MSCI All-Country World Index of global stocks was down, however, losing 1.5% in the period amid inflation concerns. The dollar gained 0.2% against the yen. 

“The overall performance was hugely helped by the sudden rebound in Japanese stocks from the end of August,” said Hidenori Suezawa, an analyst at SMBC Nikko Securities Co. Foreign bonds’ negative contribution to returns, the first in 11 quarters, was due to the yen’s strength against the euro, he said. 

The fund has been on a roll since recovering from a record loss due to the global equity rout during the pandemic in early 2020. It posted a “historic” gain of 25% in the 12 months ended March. The current six-quarter run matches its winning streaks between 2012-2013 and 2016-2017. 

Among the issues the fund may face in the coming quarters is its decision not to invest in yuan-denominated Chinese sovereign debt after FTSE Russell began adding the securities to its benchmark. In the last fiscal year, the fund shifted from Treasuries to European debt. As of the end of September, the fund had 24.2% of its portfolio in foreign bonds, while domestic debt had risen to 26.8%.  

Rising inflation could also be a risk for the fund in coming quarters, said Shingo Ide, the chief equity strategist at NLI Research Institute. “Even if it doesn’t reach stagflation, there is a risk that stock prices will drop due to an economic slowdown caused by inflation,” he said, speaking before the results. 

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