The state pension fund of Bloomberg, the world's largest, posted its first quarterly loss in two years, because declines in global stock and bond markets in the three months through March weighed down the value of its assets.
The government pension investment fund lost 1.1% of its assets during the quarter, reducing its total assets to 196.6 trillion yen $1.46 trillion, the fund said in Tokyo Friday. The Japanese stock fell 1.2% during the period, while foreign equity fell 0.6%. Domestic and foreign debt fell 1.5% and 1.2%, respectively. The dollar's 5.8% gain against the yen helped cushion the blow.
In what was otherwise a strong fiscal year, the loss during the January-March period was the first under the watch of GPIF President Masataka Miyazono, who took over the top post in April 2020 after a pandemic-induced global equity rout. Total assets fell from a record high of 199.3 trillion yen at the end of December, as it fell for the first time in two years.
There are various shocks all happening at once, including inflation, monetary tightening, the impact of the Pandemic and geopolitical issues, as well as increasing uncertainties, Miyazono said at a briefing on Friday. He said that the Fed tightening in Ukraine and the war in Ukraine were among the reasons for the fourth-quarter loss.
The fund posted a gain of 5.4% on an annual basis. Foreign bonds returned 2.3%, and overseas stocks were the best performing investment category, gaining 18.5%, followed by overseas stocks. Domestic equities went up 2.1%, while local bonds lost 1%.
During the fiscal year, the MSCI All-Country World Index of global stocks increased 5.7% and the S&P 500 Index climbed 14%, while the Topix index fell 0.4%. Yields on 10 year U.S. Treasuries increased 60 basis points in the period, while benchmark Japanese government bonds yields added 9 basis points. Japan's currency weakened 9% against the dollar.
Despite various setbacks such as the Pandemic, it's good that the GPIF managed to make such profits, said Takafumi Yamawaki, head of local rates and currencies research at JPMorgan Securities Japan Co. in Tokyo. If the yen starts to strengthen, this asset allocation would cause losses. The holdings of Japanese debt, which once made up more than a third of its assets, had the worst annual performance since March 2006, as bets on US rate hikes put Japan's so-called super-long bonds under pressure. Japan's public pension funds collectively scooped up a net 160 billion yen of overseas securities in the January-March period, while buying three times the amount of Japanese government bonds, according to central bank data.
The GPIF said it wrote off its Russia-related holdings, citing uncertainty about the assets. As of March 2021, it said it held around 170 billion yen of Russian stocks and 50 billion yen of bonds.
The aim of the GPIF is to keep its basic portfolio evenly divided into four asset classes, consisting of stocks and bonds, foreign and domestic. Alternative assets accounted for 1.07% of GPIF holdings, less than the allowable limit of 5%. The fund holds the majority of its stock investments in strategies that track indexes.
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