August 2020
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August 2020
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Japan’s GPIF investments hammered by stock losses

Tokyo business district
By Asia Asset Management  
July 8, 2020

Japan’s Government Pension Investment Fund (GPIF) suffered its biggest full-year investment loss since the global financial crisis as the coronavirus pandemic battered stock markets in the first quarter of 2020.

GPIF recorded an investment loss of 8.28 trillion yen (US$77.19 billion) for its financial year ended March 31, 2020 and a return of minus 5.2%, the world’s largest pension fund says in a statement on July 3.

It was the fund’s worst 12-month investment showing since a 9.3 trillion yen loss and minus 10.03% return in the year ended March 2009.

As a result, GPIF’s total assets dropped to 150.63 trillion yen as of end-March 2020 from 159.2 trillion yen a year ago.

Equities were the worst performers for the pension fund, with a return of minus 13.08% from foreign stocks, and minus 9.71% from domestic stocks.

Foreign bonds were the only bright spot in its portfolio, with a return of 3.55%.

But according to GPIF, even though market volatility from the pandemic may cause capital losses in the short term, its investment income is “relatively immune to such volatility and generates a continuous stream of positive return”.

“GPIF manages pension reserve fund with long-term perspective. While short-term portfolio returns are influenced by the current market trends, investment results should be monitored with long-term horizon,” the pension fund says.

The results are not unexpected given GPIF’s high exposure to stocks, according to Teruki Morinaga, director for insurance at Fitch Ratings Japan.

He notes that the fund has been raising its allocation to stocks since 2014, and that the investment loss was primarily due to negative returns in the first three months of 2020 when markets were hammered by the pandemic.

The pension fund’s “investment performance will recover in the second quarter with the improving global and domestic equity markets”, Mr. Morinaga tells Asia Asset Management.

The GPIF’s annualised investment return since its inception in 2001 was 2.58%.