FTG Blog - World's Biggest Pension Fund Has Best Performance in Two Years

World’s Biggest Pension Fund Has Best Performance in Two Years

The world’s biggest pension fund posted its best annual gain in two years, as Japanese and overseas stocks gained. The Government Pension Investment Fund returned 5.9 percent, or 7.9 trillion yen ($70 billion), in the year ended March 31, increasing assets to a record 144.9 trillion yen, it said in Tokyo on Friday. That’s the biggest advance since the fiscal year ended March 31, 2015, when it had its best annual performance on record. Domestic equities added 4.6 trillion yen as the benchmark Topix index climbed 12 percent, outweighing a loss on foreign and domestic bond holdings. Foreign stocks rose, increasing 4.3 trillion yen.

The Japanese retirement fund’s annual gain is a welcome change from the year before when it posted its worst performance since the global financial crisis after overhauling its strategy in 2014 to buy more shares and cut debt assets. GPIF, which has more than 80 percent of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.

“Fiscal year 2016’s performance results have seen positive returns on an annual basis due to a rise in both domestic and foreign stocks,” GPIF President Norihiro Takahashi said in a statement.

Japanese shares returned 15 percent over the year for GPIF. Overseas stocks added 14 percent, while the yen gained 1.1 percent against the greenback, slightly cutting into the value of foreign holdings when repatriated. The S&P 500 index had risen 14 percent in the same period.

The fund’s domestic bonds fell 0.9 percent, bringing holdings to 32 percent of assets, as an index of Japanese government debt dropped 1.3 percent. Foreign bonds lost 3.2 percent, and accounted for 13 percent of GPIF’s investments as of March end.

Japanese stocks made up 23 percent of holdings, while overseas equities were 23 percent of assets. The target levels for GPIF’s portfolio are 35 percent for domestic debt, 15 percent for foreign bonds, and 25 percent each for domestic and overseas shares. Alternative assets accounted for 0.07 percent of GPIF’s holdings, well below the allowable limit of 5 percent.

GPIF’s Takahashi said in February that investments in U.S. infrastructure were possible, but the fund has none for now. Local media had reported that GPIF would purchase debt issued by American corporations to finance infrastructure projects.

The fund also disclosed individual stock holdings and the issuers of the bonds that it held as of March 2017, a practice started in July 2016. GPIF’s biggest equity stakes were in Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc. in Tokyo and Apple Inc. outside Japan. The fund’s largest debt holdings included Japanese government bonds and U.S. Treasuries.