World’s Largest Pension Fund Reports 3.5% Increase in Q1

Japan’s Government Pension Investment Fund (GPIF) reported a 3.5% return in the first three months of FY 2017 Friday, increasing its assets by 5.1 trillion yen ($46 billion) to a record 149.2 trillion yen ($1.3 trillion).

This is the fund’s fourth consecutive quarterly gain.

In the period ended June 30, domestic equities returned 2.3 trillion yen ($20.78 billion) upon the rise of the benchmark Topix index. Foreign equities increased by 1.9 trillion yen ($17.17 billion).

GPIF’s Japanese share holdings matched the Topix’s performance, returning 6.6%. Assisted by the yen’s 7.6% decrease compared to the euro, overseas stocks returned 5.5%.

Roughly 30% of the fund’s assets were in domestic bonds, while domestic equities took up about 24% of the portfolio—almost even with foreign equities. Foreign bonds accounted for about 14% of GPIF’s assets, while short-term assets rounded out the allocation at about 8%. However, alternative assets were well below the 5% allowable limit—consisting of 0.1% of the fund’s holdings. A recent proposal was made to allow GPIF trade stock index futures, which could increase the alternative holdings. GPIF has also invested roughly 1 trillion yen into Japanese environmental, social, and corporate governance-scoring indexes.

“A positive market environment continued” in the June quarter, with good global economic data and corporate earnings supporting increases in stocks, GPIF President Norihiro Takahashi said in a statement Friday, as reported by Bloomberg. “The yen was in a weakening trend due to expectations that the Federal Reserve will raise interest rates and the [European Central Bank]will move toward normalizing monetary policy, while the Bank of Japan’s quantitative easing policy continued.”