Foreign Equities Spur Japan GPIF’s Q3 Rebound

The investment performance of Japan’s Government Pension Investment Fund rebounded sharply in the third quarter of fiscal 2024, more than offsetting a dismal second quarter that was the pension giant’s worst period since the COVID-19 outbreak in March 2020. The 4.3% Q3 return raised the pension giant’s asset value by 10,703.2 billion yen ($69.9 billion) to total $1.69 trillion.

A rally in foreign equities holdings helped fuel the GPIF’s robust return for the quarter that ended December 31, 2024, surging 8.96% after losing 5.35% the previous quarter, but it was nine basis points shy of its benchmark’s performance. Domestic equities returned 5.55% after dropping 4.92% in the second quarter and edged out the benchmark performance by 12 basis points. Foreign bonds gained 4.12% following a 5.51% loss the prior quarter but beat the benchmark by 10 basis points.

Domestic bonds were the only assets that did not post a gain in the third quarter, losing 1.33%, just two basis points shy of the benchmark’s return, after gaining 1.42% in the second quarter.

For the first three quarters of fiscal 2024, the GPIF’s total return is 4.26%, which produced an investment gain of $69 billion. The fund’s performance for the third quarter alone was more than the three quarters combined because of the Q2 loss. During the three quarters, the foreign equity portfolio has returned 13.41%, earning $53.6 billion for the pension fund but still performing below it benchmark’s 13.81% return. Foreign bonds were a distant second with a 3.79% return, adding $15.5 billion to the pension fund’s asset value and topping the benchmark’s return of 3.68%, while domestic equities rose 2.12%, contributing $9.1 billion to the coffers and beating the benchmark by 16 basis points.

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Lagging behind over the three quarters were domestic bonds, which lost 2.32% during the period, erasing $9.4 billion from the GPIF’s asset value but still beating their benchmark, which lost 2.42% during the period.

As of the end of September 2024, the pension fund’s asset allocation was 25.51% to domestic bonds, down from 26.74% in the second quarter, while domestic equities accounted for 24.99%, compared with 23.98% the previous quarter. The fund’s foreign bonds’ allocation was 24.58%, up from 24.30%, while the GPIF’s foreign equity holdings accounted for 24.93% of the portfolio, down slightly from 25% the previous quarter.

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Tags: foreign equities, Government Pension Investment Fund, GPIF, Japan

Ken Lee

The California Institute of Technology has named Ken Lee as CIO, Caltech president Thomas Rosenbaum announced Wednesday, in charge of the university’s $4.5 billion endowment.

Lee has been CIO of the Children’s Medical Center Foundation, the $2 billion endowment of Children’s Health, a Dallas-based hospital network, since 2020. Caltech began searching in October 2024 for a successor to former CIO Scott Richland, who retired in December 2024. Doug MacBean, senior managing director for investments, has served as interim CIO since Richland’s retirement.

“Ken’s broad experience across the financial sector, demonstrated success as an investment manager, idealism about and commitment to university values, and appreciation of what makes Caltech special, make him a wonderful fit,” said Rosenbaum in a statement. “We look forward to welcoming Ken to a leadership role at the Institute.”

As Caltech CIO from 2010 until his retirement, Richland grew the assets of the endowment to almost $4.6 billion from $1.6 billion, generating more than $2.7 billion in investment gains and distributing more than $2 billion to support the university.

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Lee, prior to his role at Children’s Health, was a managing director at the Carnegie Corp. of New York from 2008 to 2020. He earned a bachelor of arts degree in economics and East Asian studies from Yale University and an MBA from the Wharton School at the University of Pennsylvania.

“We appreciate Ken’s contributions to Children’s Health throughout the past four years and wish him the best in his future endeavors,” a spokesperson for Children’s Health said via email. “As we move forward, we are actively conducting a nationwide search to fill the role of Chief Investment Officer to ensure continued support for our mission to make life better for children.”

As of the Caltech Investment Office’s fiscal year 2023 report, the fund allocated 26% of its investments to alternative securities, which includes hedge funds and credit, 25% to private equity and venture capital, 25% to global developed equities, 13% to real assets, 7% to emerging markets equities and 1% to global fixed income. The fund returned 9.9% in fiscal 2023 and 8.5% over the 10-year period ending June 30, 2023.