Japan's top public pension funds — led by the ¥186.2 trillion ($1.7 trillion) Government Pension Investment Fund — continued adding private equity, infrastructure and real estate assets to their portfolios last year but with little to show for it in terms of lessening their reliance on equity market beta.
Masataka Miyazono, GPIF's president, in a July 2 briefing on GPIF's results for the fiscal year ended March 31, said the value of the fund's private markets holdings for the year jumped ¥397.5 billion to ¥1.34 trillion, less than half of the fund's roughly ¥3 trillion in outstanding commitments to alternatives managers.
But with last year's huge stock market rebound from pandemic lows accounting for 94% of GPIF's record ¥37.8 trillion gains for the year, that more than $3.5 billion increase in alternatives — focused on infrastructure and real estate assets — only lifted the fund's combined private markets exposures by 9 basis points to 70 basis points of its portfolio, well below the government's 5%, or $85 billion, ceiling for alternatives allocations.
That modest exposure to private markets has left GPIF's gains or losses almost entirely dependent on the ups and downs of its equity holdings since late 2014, when then-Prime Minister Shinzo Abe's government engineered a dramatic shift into stocks from domestic bonds as part of its signature "Abenomics" economic revitalization program.
Equity allocation targets for GPIF and other public funds more than doubled to 25% each for domestic and overseas stocks from 12% each, with an offsetting 25-percentage-point plunge in domestic bond allocations to 35%.
Since that time, GPIF's performance — for better or worse, but mostly for better — has been largely dependent on the gyrations of global equity markets.