TOKYO Aug 30 Japan's public pension fund, the
world's largest, posted an investment gain of 1.9 percent in the
April-June quarter as returns were hurt by a record quarterly
loss from its investment in Japanese bonds, the largest share of
Returns for the Government Pension Investment Fund, known as
GPIF, was sharply below a record high quarterly profit of $78
billion the previous quarter and the smallest since the
July-September quarter of 2012 when Japan's economy was in
The relatively weak performance of the massive public fund
during a period of growth could heat up a debate on whether
Japan's public pension system should further reduce its exposure
to the domestic bond market.
A reform panel established by Prime Minister Shinzo Abe is
reviewing the investment strategy of public funds, including
GPIF which collectively holds more than $2 trillion in assets.
The seven-member panel is looking into improving governance
of public funds and beefing up returns on investments by raising
exposure to equities and foreign assets as Japan's working
population ages and payouts to retirees increase. In recent
years, GPIF has underperformed major public pension funds
overseas that hold a larger share of stocks and other risk
The Abe-appointed reform panel is scheduled to reach a
conclusion by November and aims to implement proposals by April
As of the end of June, GPIF was about 57.72 percent invested
in yen bonds, 15.17 percent in Japanese equities, 9.67 percent
in foreign bonds and 12.44 percent in foreign equities.
Domestic and international fund managers and market dealers
closely watch GPIF's quarterly performance due to the size of
its $1.2 trillion portfolio - larger than the economy of Mexico.
GPIF logged an investment gain of 2.21 trillion yen ($23
billion) in the April-June period against a quarterly record
high gain of 7.63 trillion yen in the prior quarter. That
translates into a positive investment return of 1.85 percent,
versus 6.86 percent in the January-March quarter.
GPIF had a positive return of 9.7 percent from Japanese
equities in the most recent quarter, slightly underperforming
the benchmark Topix index, which rose 9.77 percent. At the same
time, the fund posted a positive return of 4.01 percent from
foreign bonds and 6.14 percent from foreign equities.
But those gains were largely offset by the loss of 945.1
billion yen on domestic bonds -- the biggest ever loss in value
since the public fund was formed in 2001. In percentage terms
the loss was 1.48 percent but domestic bonds represented about
58 percent of GPIF's total holdings.
The fund's performance over the past year has been helped by
the weaker yen and gains in Japanese shares especially since
November when Abe began campaigning on a platform promising
aggressive reflationary policies.
In early June, GPIF changed its portfolio strategy to
increase its exposure to domestic and foreign equities and
foreign bonds. At the same time, the fund reduced the target for
its allocation to Japanese government bonds to 60 percent from
67 percent. The move represented a significant shake-up of
investment strategy since the fund was formed in 2001.
After accounting for payouts, the size of GPIF's total
assets rose 0.4 percent to 121 trillion yen as of the end of
June from 120.5 trillion yen in March.