July 6, 2012 / 8:02 AM / 7 years ago

Japan's giant pension fund sold $32 billion of assets in 2011/12

TOKYO (Reuters) - Japan’s Government Pension Investment Fund, the world’s biggest public pension fund, sold or cashed out a total of 2.54 trillion yen ($31.77 billion) of domestic and foreign bonds in the financial year that ended in March to raise cash to cover to payout shortfalls.

The public pension fund, known as the GPIF, has become a net seller of assets to raise cash for pension payouts since 2009/10, after inflows from loans being paid back by public entities stopped.

The fund, under pressure to raise returns to cope with a rapidly ageing population, is closely watched by markets given the size of its $1.42 trillion portfolio, which is bigger than the economy of Spain, the world’s 12th largest.

It is the third straight year in which the fund has been a net seller of assets.

The fund said on Friday that total assets fell to 113.61 trillion yen ($1.42 trillion) by the end of March compared with 116.32 trillion yen a year earlier.

But its selling from assets was down sharply from 4.77 trillion yen the previous year, as it was able to cover part of the shortfall with proceeds from redemptions and interest payments from loans to public entities, known as the Fiscal Investment and Loan Program, or so-called Zaito bonds.

The fund sold 2.46 trillion yen of Japanese bonds, including maturing bonds amounting to 124.6 billion yen.

Its sales of foreign equities totaled 80.1 billion yen, all of which took place in March.

In the year to March 2013, when the first wave of Japan’s baby boomers is set to turn 65 and becomes eligible to receive pension payments, the public fund would need about 8.87 trillion yen of cash for pension payouts.

POSITIVE INVESTMENT RETURN

The GPIF was able to generate positive investment returns on the annual basis due to strong performance during the January-March quarter.

“We made big profits during the fourth quarter (January-March). Performance improved as the yen’s strength reversed after the Bank of Japan’s credit easing,” Masahiro Ooe, a councilor at the GPIF, told a news conference.

The economic recovery in the United States and a series of monetary easing measures by other global central banks helped stabilize markets and calmed the crisis in Europe, which also contributed to post investment gains, Ooe said.

The fund’s rate of return on its overall investments improved to plus 2.32 percent in the 2011/12 financial year compared with minus 0.25 percent the previous year.

In terms of value, the GPIF posted investment gains of 2.61 trillion yen in 2011/12 compared with losses of 299.9 billion yen for the previous year.

On a quarterly basis, the fund said its rate of return jumped to plus 5.11 percent, or investment gains of 5.48 trillion yen profit, in January-March, from plus 0.58 percent, or gains of 618.7 billion yen, in October-December.

The strong gains in the quarter helped the GPIF to produce positive returns in all four assets classes on an annual basis, gaining a positive return of 2.92 percent in domestic bonds, 0.57 percent in domestic stocks, 4.77 percent in foreign debt and 0.49 percent in foreign equities. ($1 = 79.9500 Japanese yen)

Reporting by Chikafumi Hodo; Editing by Michael Watson & Kim Coghill

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