Japan's Government Pension Investment Fund reported a 5.42%, or ¥10 trillion ($74 billion), gain for the fiscal year ended March 31, lifting the value of the world's largest pension portfolio to ¥196.6 trillion, or about $1.61 trillion as of that date.
GPIF posted those solid gains despite absorbing a ¥2.2 trillion loss over the final three months of the year as a combination of spiking inflationary pressures, rising pressure for U.S. Federal Reserve Bank rate hikes and geopolitical uncertainties in the wake of Russia's invasion of Ukraine sparked simultaneous sell-offs of stocks and bonds around the world.
Domestic and foreign stocks and bonds all registered losses over the final three months of the year but the 25% of GPIF's portfolio invested in foreign equities suffered the least damage, with a ¥251 billion decline that was roughly a third to a half of the losses suffered by domestic stocks and bonds, and foreign bonds.
The S&P 500 index declined roughly 5% for the quarter but the yen depreciated by a similar magnitude over the period, as Japan's central bank stuck to its easy monetary stance even as the Fed and other central banks prepared to tighten policy.
For the fiscal year, GPIF's foreign equity holdings contributed ¥8.4 trillion of the fund's ¥10.1 trillion of investment gains. Domestic equities and foreign bonds, meanwhile, contributed just under ¥1.1 trillion yen each. The pension fund's domestic bond holdings suffered a ¥496 billion loss.
The fund ended the fiscal year with allocations of close to 25% each for domestic and foreign stocks and bonds, on the back of continued rebalancing. For the 12-month period, a total of ¥5.5 trillion was shifted out of foreign stocks, with the majority of it reinvested in domestic bonds.
A presentation on GPIF's fiscal-year results on the fund's website said it used index futures for the first time to facilitate efficient rebalancing.
In a press briefing, meanwhile, GPIF President Masataka Miyazono noted that the fund's allocations to alternatives strategies ended the quarter at 1.07% of its portfolio, up from 0.92% three months before. It was the first time GPIF, which is permitted to invest up to 5% of total assets in alternatives, exceeded the 1% allocation mark, he said.
