Japan's GPIF suffers massive quarterly loss

27 Aug 2016 | By Ramya

Japan's Government Pension Investment Fund (GPIF) - the world's biggest pension fund - posted a quarterly loss of $52 billion.

Investment gains made by GPIF since it revamped its strategy by cutting bonds and boosting shares have been wiped out as the Yen surged and stocks tumbled post-Brexit.

GPIF lost 3.9% (5.2 trillion Yen) in 2016's Q2 reducing its assets to 129.7 trillion Yen.

In context: World's largest pension fund hit by loss

IntroductionAbout Japan's GPIF

Japan's Government Pension Investment Fund (GPIF) was initially set up in April 2001 to replace the Pension Welfare Service Public Corporation.

The GPIF later had an organization restructuring after which it was re-established on 1 April 2006.

It took over the old GPIF's responsibilities as an independent administrative body to manage and invest the Reserve Funds of the National Pension and Employees' Pension Insurance.

GPIF's mandate

Japan GPIF's mandate entrusted by the Ministry of Health, Labour and Welfare is to contribute to the stability of the schemes of the National Pension and Employees' Pension Insurance by investing the Reserve Fund. Profits made are deposited to the Pension Special Account.
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27 Aug 2016Japan's GPIF suffers massive quarterly loss

GPIF's official Shinichiro Mori's statement

"The UK's decision on Brexit was a surprise for the market, but it has mostly priced that in and calmed down. Stocks are on the verge of rebounding. Still, the Yen is continuing to trade sideways against the dollar, so we are cautiously watching that."
GPIF's worst annual performance followed by quarterly loss

LossesGPIF's worst annual performance followed by quarterly loss

The loss has erased a 4.1-trillion-Yen investment return for the last six quarters starting Oct'14, the month the body decided to turn half its assets into equities.

The quarterly loss followed a 5.3-trillion-Yen-loss in the last fiscal year through Mar'16 - GPIF's worst performance since the global financial crisis.

The loss was posted after domestic stocks plummeted and Yen surged reducing GPIF's overseas assets value.

Market fluctuations won't damage pension beneficiaries

GPIF President Norihiro Takahashi stated: "We invest with a long-term view. Even if market prices fluctuate in the short term, it won't damage pension beneficiaries. We are also strengthening risk management and continuing to hire experts."
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AssetsDomestic bonds, the only asset class to post a profit

Post-Brexit, GPIF's Japanese shares sank 7.4% as the benchmark Japanese stock index Topix lost 7.5%.

Over 80% of the fund's local equity investments are passive.

GPIF's overseas stocks declined 7.8%; while its foreign debt also fell 8% as the Yen jumped 9.1% against the USD.

The only asset class of GPIF to have posted a profit was domestic bonds that surged in the quarter.

InvestmentsGPIF's overseas equities form 21% of its assets

By Jun'16 (Q2) end, 21% of GPIF's investments were in local stocks and 39% in domestic bonds.

Its overseas equities formed 21% of assets and foreign debt accounted for 13%.

Its alternative investments were 0.05% of holdings, fell from 0.06% at Mar'16 (Q1) end.

It targets allocations of 25% each for overseas and Japanese stocks; 35% for local bonds and 15% for foreign debt.