Japan’s Government Pension Investment Fund was dethroned as the world’s biggest pool of retirement savings as a depreciating yen eroded the value of its assets in dollar terms.
The fund posted a record gain for the three months through March, generating a 9.5% return, but the yen’s slump to a 38-year low against the greenback was deep enough to put the value of its assets below that of Norway’s wealth fund in dollar terms.
Total assets reached 245.98 trillion yen ($2.07 trillion) as of end-March, the GPIF said in Tokyo on Friday. That compares with Norway’s 17.719 trillion krone ($2.26 trillion) fund.
“Regardless of whether we are number one or number two, we will seek investments that will meet pensioners’ expectations so we will be considered a top-class investor in the world,” Masataka Miyazono, the fund’s president, said at a news conference.
The GPIF’s holdings of Japanese stocks returned 18.2% during the quarter, while domestic bonds incurred a loss of 0.6%. Investments abroad gained 15.8% for equities and 5.4% for bonds, as the dollar appreciated 7.3% against the yen. The fund posted a record 45.4 trillion yen return for the total fiscal year.
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During the first three months of this year, the MSCI All-Country World Index of global stocks gained about 7.8% and the S&P 500 Index climbed 10%, while the Nikkei 225 Stock Average jumped 21% to an all-time high.
In US dollar terms though, the return on the Japanese blue-chip gauge was about 12%. Yields on 10-year US Treasuries climbed 32 basis points, while benchmark Japanese government bond yields added about 11 basis points.
The yen has fallen more than 12% against the US dollar this year, the worst performer among major currencies, as the vast gap between interest rates in Japan and the US kept pressure on the currency.
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The GPIF said it had earned an excess return of 130 billion yen from its active investment in foreign and domestic stocks, a new initiative by chief investment officer Eiji Ueda.
“We’ve just started this so it may be too early to talk about results but we were off to a smooth start,” Miyazono said.
The pension fund hired 23 new managers for active investments in Japanese stocks and 14 managers for foreign equities during the last financial year. Meanwhile, it ended contracts with seven active managers for foreign bonds and five active managers for foreign stocks, both the biggest number of cancelations in the past decade.
The percentage of active investments in its foreign bonds and domestic stocks portfolio dropped to a record low.
Miyazono, whose term ends in March, has seen the fund’s assets increase more than 50% in value since he took over from Norihiro Takahashi in April 2020. Under his management, the fund has pushed for improvements in corporate governance, the expansion of active investments and the use of derivatives to reduce risk on foreign securities.
Chart: Bloomberg
