Japan's Government Pension Investment Fund, Tokyo, posted a record 10.2% annual return as stocks surged and a weaker yen boosted the value of overseas assets.
The GPIF held ¥120.5 trillion ($1.2 trillion) in assets as of March 31, boosted by a 29% surge in overseas equities and a 23% gain in Japanese stocks, according to a statement released by the fund Tuesday. The total return is the biggest since 2006, when the pension fund was established in its current form by the government.
The pension fund said on June 7 that it's cutting local bond holdings to buy more stocks and foreign securities, and plans to leave its asset allocations at the new levels until at least March 2015. The shift toward higher-yielding assets comes as the manager prepares to fund retirements in the world's oldest population.
“The 10% return was OK given it's a pension fund,” said Ichiro Takamatsu, a fund manager at Tokyo-based Bayview Asset Management Co., which oversees ¥129 billion. “But in retrospect, they could've earned a bit more if they allocated more to equities like foreign pension funds do.”
The Topix index, the country's broadest equity measure, rose 21% in the year ended March 31, the best gain since 2010. Benchmark 10-year government bond yields have swung from an all-time low of 0.315% to as much as 1% since the Bank of Japan announced monetary easing measures in April.
Overseas bonds returned 18% in the year, while domestic bonds yielded 3.7%, the statement said.
“Returns from Japanese stocks were positive, and the weaker yen helped, and stocks abroad rose too,” GPIF President Takahiro Mitani said in a June 21 interview. “Last year, with all domestic and foreign assets being positive, was a very unusual case. Normally when stocks rise, bonds fall and vice versa. That's why we invest in various assets — so if somewhere is bad, somewhere else is good.”