Japan Pension Fund Posts Loss in Q2 2010

August 30, 2010 (PLANSPONSOR.com) - Japan's public pension fund, the world's largest, with $1.4 trillion in assets, posted its first negative return in five quarters during April-June, Reuters reports.

The Government Pension Investment Fund (GPIF) said the rate of return on its investments was -2.94% in 2nd quarter, compared to 1.29% in the prior quarter. It was its first quarterly decline since Q1 2009 and the biggest drop since Q4 2008, when the market crisis began, according to Reuters.  

In value terms, GPIF’s performance translated to a loss of 3.59 trillion yen ($42 billion) in April-June, against a profit of 1.55 trillion yen the previous quarter. Total assets fell 5% to 116.8 trillion yen.   

Japan’s benchmark Nikkei stock average fell 15.4% during the quarter, while the yen strengthened 5.3% against the dollar and 14.3% on the euro, setting a tough environment for the pension fund, Reuters said.  

GPIF, which invests the reserves of national and corporate pension plans, allocates about 20% of its assets to domestic and foreign stocks, and most of the rest in the Japan Government Bonds market, where the benchmark 10-year bond yields around 1%. In the April-June quarter, GPIF’s investment in domestic bonds produced a return of +2.29%, or a 1.42 trillion yen profit, somewhat offsetting losses in domestic and overseas stocks and foreign bonds.  

GPIF took the biggest hit from foreign equities, posting a return of -17.43%, or a 2.26 trillion yen loss.  It lost 13.93%, or 2.05 trillion yen, on Japanese stocks, and 7.51%, or 761.7 billion yen, on foreign bonds.  

Comparatively, the fund managed to outperform the California Public Employees’ Retirement System (CalPERS), which suffered a fall of 4.5%, but fell short of some other counterparts such as the Canada Pension Plan Investment Board, which had a return of -1.3%. 

“We are long-term investors so we won’t react too sensitively when looking at our investment results for a single quarter,” Nobusuke Tamaki, a director-general at GPIF, told reporters.