The world’s biggest pension fund suffered a grim third quarter, losing $64bn — or 5.6 per cent of its value — as global stock markets fell.
Although much of the loss was likely regained as markets rallied in October, it is a reminder of the risks Japan’s Government Pension Investment Fund is taking after ramping up its equity exposure.
Results from the $1.1tn GPIF are likely to show increased volatility in the future after it changed its target portfolio to 50 per cent equity last year to boost returns and help service Japan’s rising pension bill.
“The volatility of short-term profits may have increased, but from a long-term perspective the risk of a shortfall in pension assets has decreased,” said Yoshihide Suga, the government’s chief cabinet secretary.
Most of the losses came from its holdings of domestic and international equities, which were down 12.8 and 11 per cent respectively, while domestic bonds generated a modest profit.
The losses were almost identical to the GPIF’s benchmark indices for those assets. Since the end of the third quarter, Japan’s Topix stock market index has rallied by almost 12 per cent to close at 1,580 on Monday.