Japan's Government Pension Investment Fund reported a 3.42% gain for the GPIF's fiscal second quarter ended Sept. 30, lifting the value of its investment portfolio to ¥165.6 trillion ($1.46 trillion).
Norihiro Takahashi, GPIF's president, in comments posted on the pension giant's website, attributed those solid results to strong gains for U.S. and Japanese stocks during the quarter, driven by continued robust economic data and corporate earnings.
Foreign and domestic stocks accounted for ¥2.9 trillion and ¥2.4 trillion, respectively — or a combined ¥5.3 trillion — of the fund's ¥5.4 trillion in investment gains for the quarter.
Elsewhere, the fund's ¥441 billion in gains on its foreign bond holdings just more than offset ¥337 billion of losses on its holdings of Japanese government bonds — reflecting an incipient rebound in the country's rock-bottom yields to 13 basis points at the end of September from three basis points at the close of the previous quarter.
Mr. Takahashi in his comments Nov. 2 also cited the yen's decline in global currency markets — as the latest U.S. rate hike expanded the interest rate differential between the U.S. and Japan — as a factor boosting the value, in yen terms, of the GPIF's more than 40% allocation to overseas stocks and bonds.
The fund's allocations to foreign and domestic stocks alike eclipsed its allocation to domestic bonds for the first time.
GPIF's allocation to domestic bonds at the end of September was 25.26%, lower than its 25.7% weighting in foreign stocks and its 25.65% holdings of domestic stocks.
Three months earlier, while domestic bonds hit a then-historic low of 27.1%, that allocation still nosed out the fund's allocations of 25.6% to domestic stocks and 25.3% to foreign stocks.
GPIF's holdings of foreign bonds, meanwhile, dipped to 14.8% from 15.3% at the end of June.
The pension fund's holdings of short-term instruments appeared to be the primary recipient of the continued reduction in domestic bonds, increasing to 8.6% from 6.7% at the end of the prior quarter.
Recently, GPIF announced a tweak to its policy asset allocation that will allow the fund to lower its bond holdings further.
When GPIF announced its last major asset allocation overhaul in October 2014, the fund set a 35% target for domestic bonds, with room to range within 10 percentage points on either side of that figure.
In late September, however, the fund said it will apply that 25% floor to GPIF's combined holdings of domestic bonds and cash. As of Sept. 30, GPIF reported 25.26% in domestic bonds and 8.58% in cash, or a combined 33.84% weighting.
Meanwhile, the GPIF reported an 18 basis-point weighting in alternatives as of Sept. 30, an incremental increase from the 17 basis-point weighting reported the previous quarter. Under the fund's current operating guidelines, GPIF can allocate 5 percentage points of its portfolio to alternatives such as private equity, real estate and infrastructure.