Japan's GPIF reports 1% gain for latest quarter

Japan's Government Pension Investment Fund said on Friday its portfolio rose 1% to ¥194.1 trillion ($1.74 trillion) as of Sept. 30, buoyed by holdings of domestic stocks.

A slight decline in the value of GPIF's foreign equity exposure for the period was offset by the more than 5.3% gain on the fund's holdings of Japanese stocks, on the back of "the normalization of economic activities" amid COVID-19 vaccination progress and expectations of supportive economic policies, GPIF President Masataka Miyazono said in a statement.

The world's biggest pension fund has maintained roughly equal exposure to four asset classes — foreign and domestic stocks and bonds — for more than a year, but it has been the half of the portfolio parked in equities that's consistently powered the fund's gains.

For the past two quarters, however, GPIF's foreign and domestic equity exposures have been out of sync. The fund's overseas holdings drove strong gains for the quarter ended June 30 despite a retreat by domestic stocks.

GPIF posted a ¥1.88 trillion gain for the latest quarter, with a ¥2.59 trillion gain for domestic stocks more than offsetting declines of ¥409.1 billion and ¥356.5 billion, respectively, for domestic bonds and stocks. Domestic bonds, meanwhile, posted a ¥50.1 billion gain.

The Sept. 30 close of the quarter found GPIF's holdings of domestic bonds rising to 26.8% of the portfolio, up from 25.4% on June 30. Likewise, the fund's exposure to domestic stocks edged up to 25% from 24.5%.

Holdings of foreign stocks, meanwhile, dropped to 24% from 25.4%, while foreign bonds slipped to 24.2% from 24.7%.

GPIF continued to report modest if steady progress in boosting the fund's allocations to alternatives, with 0.82% of the portfolio in infrastructure, private equity and real estate assets, up from 0.76% at the end of the previous quarter.

The fund continued to rely on beta for the vast bulk of its returns, even as it managed to exceed its benchmark for each asset segment by a few basis points over the latest quarter.

For example, GPIF reported a 5.35% gain for its domestic stock holdings, edging out a 5.32% return for the TOPIX benchmark, while a 0.77% decline for its foreign equity exposure was marginally ahead of the MSCI ACWI index's 0.79% drop.