World's big­gest pen­sion fund adds $42b as stocks gain

The Pak Banker - - MARKETS/SPORTS -

The world's big­gest pen­sion fund posted its best quar­terly gain in a year as a re­bound in stocks helped add $42 bil­lion to the value of Ja­panese as­set man­ager's in­vest­ments. The 139.8 tril­lion yen ($1.2 tril­lion) Govern­ment Pen­sion In­vest­ment Fund de­liv­ered a 3.6 per­cent re­turn in the three months ended De­cem­ber as its hold­ings rose by 4.7 tril­lion yen, ac­cord­ing to doc­u­ments re­leased Tues­day in Tokyo. That's the big­gest in­crease since the same pe­riod of 2014. The fund gained 3 tril­lion yen on Ja­panese stocks and 1.6 tril­lion yen on over­seas eq­ui­ties, while for­eign bonds were the only as­set class to de­cline.

The re­sults pro­vide some respite for Prime Min­is­ter Shinzo Abe, who over­saw the fund's dou­bling of its al­lo­ca­tion to stocks, af­ter GPIF had its worst loss in com­pa­ra­ble data start­ing from April 2008 in the pre­vi­ous three months. They came as Ja­panese and global eq­ui­ties re­bounded at the end of last year from a slump fol­low­ing China's shock cur­rency de­val­u­a­tion. Still, the gains will prob­a­bly prove fleet­ing as share mar­kets re­sumed their down­turn in 2016, an elec­tion year in Tokyo.

"The re­turn from Ja­panese stocks was a lit­tle big­ger than ex­pected. They must have been adding to hold­ings," said Shingo Ide, chief equity strate­gist at NLI Re­search In­sti­tute in Tokyo. Still, "Ja­pan's in­vest­ing en­vi­ron­ment is get­ting worse. GPIF is quickly blamed for losses and they might find it hard to take risk." GPIF held 38 per­cent of as­sets in Ja­panese debt as of Dec. 31 and 23 per­cent in the na­tion's eq­ui­ties, ac­cord­ing to the state­ment. The fund had 14 per­cent of hold­ings in for­eign bonds and 23 per­cent in over­seas stocks. Al­ter­na­tive in­vest­ments made up 0.04 per­cent. GPIF tar­gets 25 per­cent each for shares at home and abroad, 35 per­cent for lo­cal bonds and 15 per­cent for over­seas debt.

Most of GPIF's equity hold­ings are pas­sive, which means per­for­mance tends to track bench­mark gauges. The Topix in­dex of Ja­panese stocks had a to­tal re­turn of 9.8 per­cent in the quar­ter ended De­cem­ber, in­clud­ing rein­vested div­i­dends, while GPIF posted a 9.9 per­cent gain on lo­cal shares. The Topix has fallen 16 per­cent this year, and the yen has risen 6.3 per­cent against the dol­lar. A stronger yen erodes the value of the fund's over­seas in­vest­ments when repa­tri­ated.

GPIF's 0.8 per­cent gain on Ja­panese debt in the quar­ter ended De­cem­ber com­pares with a1 per­cent ad­vance on a Bloomberg gauge of the na­tion's sov­er­eign bonds dur­ing the pe­riod. The fund's for­eign debt in­vest­ments lost 1.1 per­cent in the three months.

The fund and its over­seers have al­ready faced crit­i­cism in par­lia­ment about per­for­mance in 2016. GPIF prob­a­bly lost 4 tril­lion yen in the first week of the year, op­po­si­tion law­maker Kazunori Ya­manoi said in Jan­uary, adding his of­fice had been re­ceiv­ing calls from wor­ried pen­sion­ers af­ter Ja­panese shares posted the worst start to a year on record. Abe said GPIF has a longterm in­vest­ment per­spec­tive and it's point­less to fo­cus on short-term re­sults.

"GPIF's per­for­mance is per­haps the one is­sue that could re­ally turn Abe­nomics into a li­a­bil­ity for Abe," To­bias Har­ris, a political risk an­a­lyst with Te­neo In­tel­li­gence, said be­fore the re­sults were an­nounced. "Ob­vi­ously, the next quar­ter's re­turns will be more im­por­tant than the cur­rent re­turns, but this round will be some­thing of a test run for op­po­si­tion par­ties."

GPIF is head­ing for losses at the start of 2016, Hiroyuki Mit­su­ishi, a coun­cilor at the fund, said at a press con­fer­ence in Tokyo on Tues­day. GPIF is man­aged for the long term and pen­sions won't be im­pacted, he said, while not­ing that the fund has re­turned 3.1 per­cent an­nu­ally since its in­cep­tion. Per­for­mance is more volatile with the cur­rent as­set mix, but the risk of not meet­ing pen­sion pay­ments has re­ceded, he said.

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