Japan's Government Pension Investment Fund on Friday reported a record quarterly loss of just less than ¥15 trillion ($138 billion) for the December quarter on the back of the sharp sell-off of global stocks in the final months of 2018.
The result left GPIF's portfolio valued at ¥150.7 trillion as of Dec. 31, effectively erasing the fund's combined gains of the previous five quarters.
In a statement posted on the fund's website, GPIF's President Norihiro Takahashi said the growing concerns about global growth weighing down stocks as 2018 came to an end prompted safe-haven buying of the yen as well — contributing further to the portfolio's 9.06% retreat for the three months.
GPIF had mostly benefited from taking on more risk since the fund roughly doubled its equity allocations in late 2014, lifting the portfolio's stock weighting to 50% at the expense of Japanese government bonds.
The strong start for global equities so far this year, with key U.S. and Japanese stock benchmarks up by more than 7% and 3%, respectively, could provide some reassurance for maintaining the heightened exposure to risk assets GPIF adopted more than four years ago.
In his statement, Mr. Takahashi repeated the GPIF's mantra that it invests for the long term.
For the latest three months, only GPIF's allocations to Japanese government bonds posted gains — of ¥424.2 billion, as heightened concerns about the global economy pushed the yield on the 10-year Japan Government Bond to zero from more than 12 basis points at the close of the prior quarter Sept. 30.
The fund's holdings of domestic and overseas equities, by contrast, suffered losses of ¥7.7 trillion and ¥6.9 trillion, respectively. Combined, those equity-related losses accounted for more than 98% of the portfolio's total ¥14.8 trillion decline for the quarter.
GPIF's foreign bond portfolio, meanwhile, suffered a ¥717 billion loss.
Reflecting market movements for the three-month period, the fund's holdings of Japanese government bonds reclaimed pride of place as the asset class with the portfolio's biggest allocation, at 28.2%. At the close of the Sept. 30 quarter, JGBs had lost that distinction for the first time, with a 25.3% weighting that trailed those of both domestic and overseas equities.
At the end of the latest quarter, GPIF's allocation to foreign equities stood at 24.3%, down from 25.7%, while domestic equities accounted for 23.7% of the portfolio, down from 25.65%.
The weighting for foreign bonds, meanwhile, rose to 17.4% from 14.8%. Cash holdings stood at 6.4%, down from 8.6%.
The GPIF's allocations to alternatives strategies — including infrastructure and real estate — stood at 0.21%, up from 0.18% at the close of the prior quarter.