Japan's public pension fund, the world's largest, suffered an investment loss of $26 billion in April-June, its first loss in three quarters, as the yen's strength and falls in domestic and foreign equities hurt its quarterly performance.
The Government Pension Investment Fund (GPIF), under pressure to raise returns to cope with a rapidly ageing population, is closely watched by global markets given the size of its $1.37 trillion portfolio, which is equivalent to the economy of Australia, the world's 13th-largest.
The GPIF posted a negative return of 1.85 percent in April-June, a sharp reversal from a positive return of 5.11 percent for the previous quarter. The performance translates into an investment loss of 2.069 trillion yen ($26.34 billion), compared with a gain of 5.48 trillion yen in January-March. It was the sixth biggest quarterly loss in terms of value since the GPIF started supervising pension money in 2001.
Total assets under management fell to 108.2 trillion yen by the end of June compared with 113.61 trillion yen in March. "We can't go into details but it's appropriate to think the reason (for a sharp fall in assets) was due to market performance and selling of our assets to raise cash," Masahiro Ooe, a councillor at the GPIF, told a news conference.
The GPIF invests the reserves of national and corporate pension plans and allocates nearly two-thirds of its assets to Japanese government bonds, where benchmark 10-year yields were around 0.8 percent, within sight of a nine-year low of 0.72 percent reached last month.
Raising healthy investment returns is vital for the GPIF as it has been paying out more in benefits than it receives in contributions to the national pension system since the 2009/10 financial year. For the current financial year, which started in April, the fund plans to generate about 8.87 trillion yen in cash for pension payouts. The fund performed especially poorly in Japanese stocks, with a negative return of 9.83 percent, or a 1.39 trillion yen investment loss. That was worse than the benchmark performance of negative 9.74 percent, based on the Tokyo stock market's broad Topix index, including share prices and dividends. Japanese shares slumped during the quarter due to the yen's strength, wariness over the economic outlook in China and the United States, and Europe's debt crisis.
The Topix dropped almost 10 percent by the end of June from March. On June 5, it fell below 700 to its lowest in more than 28 years. The market's benchmark Nikkei average slipped 11 percent during the period. The fund's investment in foreign bonds produced a negative return of 3.46 percent, or a 343.3 billion yen loss. The public fund's investment in Japanese bonds produced a positive return of 1.04 percent, or a 604.1 billion yen investment gain.