The $1.1 trillion Government Pension Investment Fund lost 5.6 percent in the third quarter when the value of the Japanese asset manager’s investments fell by 7.9 trillion yen, or $64 billion.
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It was the biggest quarterly investment loss for the $1.2 trillion Government Pension Investment Fund (GPIF), which doubled its target allocations for equities in October previous year under Prime Minister Shinzo Abe’s push to promote risk-taking and foster confidence in financial markets. The GPIF also said the return on its investment stood at minus 5.59 percent.
As of end-September, the fund had 21.35 percent in Japanese equities, down from 23.39 percent three months earlier, and below its target of 25 percent. The fund lost ¥8-trillion on its domestic and foreign equities and ¥241bn on overseas debt, while Japanese bonds handed GPIF a ¥302bn gain.
Of the four major asset classes the GPIF invests in, three – domestic stocks, foreign stocks and foreign bonds – posted negative returns in the quarter, according to a statement released Monday.
GPIF hadn’t posted a quarterly loss since the three months through March 2014.
The fund has almost 53 per cent invested in bonds, predominantly domestic, and the over 4 per cent in short term assets. The fund could hedge its foreign-exchange risk if needed, Mr Mitsuishi said, while declining to comment on whether the GPIF had done so. Short-term returns are more volatile these days, but there’s less risk that GPIF will fail on its long-term objective of covering pension payouts, he said.
The fund’s foreign debt investments lost 1.3 per cent during the quarter, as the yen strengthened 2.2 per cent.
Much of the fund’s fall was triggered by the plunge in Chinese stock market, which was followed by other global stock markets, as concerns over a continuing slowdown in China, the world’s second-largest economy, deteriorated investor sentiment.
“They changed their portfolio knowing something like this could happen, and they’re not going to change their investment policy because of this”, said Tomohisa Fujiki, the head of interest-rate strategy for Japan at BNP Paribas SA in Tokyo.
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In the third-quarter, the Nikkei 225 slumped 12.8%.
