* Posts biggest investment loss since Lehman shock
* Fund's asset size falls by 4.3 pct
* Suffers huge loss in foreign stocks, domestic shares
* At final stage of picking managers for emerging markets
By Chikafumi Hodo
TOKYO, Dec 2 Japan's public pension fund,
the world's largest, logged its worst investment performance in
three years in July-September as strength in the yen and
Europe's debt crisis hurt returns in foreign assets and domestic
The Government Pension Investment Fund (GPIF), which needs
to raise returns for a rapidly ageing population, said its rate
of return fell to minus 3.32 percent, or a loss of 3.73 trillion
yen ($48 billion), after a slim return of plus 0.21 percent, or
a profit of 240 billion yen, in April-June.
Hurt by huge losses on foreign equities in particular, it
was the fund's first investment loss in five quarters and its
biggest loss since the October-December quarter in 2008 when
Lehman Brothers went bankrupt.
"Our performance was mainly hurt by falls in domestic and
foreign equities," Masahiro Ooe, a councilor at the GPIF, told a
news briefing on the fund's performance.
"The yen's appreciation worsened the performance in foreign
equities and foreign bonds."
Its rate of return in the six months to September was minus
3.1 percent, outperforming the California Public Employees'
Retirement System (Calpers) rate of minus 5.4 percent, but
lagging the Canada Pension Plan Investment Board, which produced
a return of plus 0.1 percent during the period.
The fund, whose portfolio is nearly worth as much as the
Russian economy, said total assets fell 4.3 percent to 108.9
trillion yen during the period.
The GPIF has been selling assets to raise proceeds for
pension payouts since the financial year 2009/10 and plans to
raise about 8.9 trillion yen worth of cash by selling assets in
the current financial year to March 2012.
In the previous financial year, the fund sold 4.77 trillion
yen worth of domestic bonds and foreign securities, its second
year of being a net seller of assets.
The GPIF suffered large losses on foreign and domestic
equities, as well as foreign bonds due to the strength of the
Japanese currency, which appreciated nearly 5 percent
against the dollar during the period.
Falls in global share prices stemming from Europe's
sovereign debt problems and concerns over the global economic
slowdown also depressed the GPIF's performance in equities.
For foreign equities, it recorded a negative return of 21.36
percent, or a 2.74 trillion yen loss, and for Japan stocks, it
posted a negative return of 9.75 percent, or 1.27 trillion yen.
For foreign bonds, it posted a negative return of 4.27
percent, or 406.1 billion yen, but managed to book a positive
return of 1.06 percent, or a profit of 618.4 billion yen, in
Japanese government bonds.
The GPIF invests the reserves of national and corporate
pension plans. It allocates about two-thirds of its assets to
JGBS, where the benchmark 10-year yield is now
around 1.065 percent.
The GPIF plans to begin investment in emerging markets
equities by the end of the current financial year in March 2012
and Ooe reiterated that it is in the last phase of selecting
"We cannot give any details now, although we are in the
final stage (of choosing managers). We'll disclose them swiftly
as soon as we complete our processes."
Sources familiar in the matter said in September that 11
companies were on the final shortlist to supervise investments
into emerging markets equities for the GPIF.
Six of the institutions on the shortlist are Japanese, with
the rest from overseas, the fund industry sources said.
They said the Japanese money managers are: Mizuho Asset
Management, Sumitomo Mitsui Asset Management, Chuo Mitsui Asset
Management, Nomura Asset Management, Nomura Funds Research and
Technologies, and T&D Asset Management.
They said the other firms are: Invesco, Neuberger
Berman, Lazard Asset Management, BNY Mellon and
BNP Paribas Investment Partners.