Japan's Government Pension Investment Fund on Friday reported a record 7.98% gain for the quarter ended Dec. 31, powered by optimism about U.S. growth following Donald Trump's election victory.
The quarter's ¥10.5 trillion ($90 billion) investment gain boosted the assets of the world's largest pension fund to a record ¥144.8 trillion.
In U.S. dollar terms, at $1.3 trillion, GPIF's portfolio was little changed from the prior quarter, as the yen's drop to 116.64 to the dollar from 101.27 offset the sharp gains in yen terms.
Norihiro Takahashi, GPIF's president, said in a statement that expectations that U.S. fiscal policy would kick into high gear helped power U.S. stocks to record highs, and bolstered market sentiment globally.
That tailwind paid dividends for a GPIF portfolio which, in October 2014, more than doubled its targets for equity allocations to 25% each for domestic and overseas stocks.
For the quarter, foreign equities surged 16.5%, or ¥4.8 trillion, and domestic equities jumped 15.2%, or ¥4.6 trillion.
With an additional ¥1.6 trillion in gains on foreign bond holdings, the portfolio advanced by more than ¥10 trillion even after accounting for a ¥519 billion loss on GPIF's domestic bond holdings.
The loss on domestic bonds reflected a decline in Japanese government bond prices, which propelled 10-year JGB yields to 5 basis points from -8 basis points three months before.
Domestic stocks accounted for 23.76% of the total portfolio at the close of the quarter, up from 21.59% three months before. The weight of foreign stocks rose to 23.16% from 21%.
Foreign bonds rose to 13.37% of the portfolio from 12.95%.
Domestic bonds, meanwhile, dropped to 33.26% of the portfolio from 36.15%, and cash fell to 6.46% from a record 8.75% at the close of the prior quarter.
The GPIF announcement said alternative investments accounted for 7 basis points of the fund's portfolio as of Dec. 31.
While that left alternatives at a tiny fraction of GPIF 5% target weighting, the latest quarter was nonetheless the first sign of increasing allocations over the past year, where the typical weighting stood at 5 basis points.