The world’s biggest pension fund, Japan’s Government Pension Investment Fund (GPIF), had four straight quarters of loss last year, reports an article in Bloomberg. In what is the longest stretch of losses for the fund in 20 years, the GPIF dropped 1% or $14 billion. In that span of time, the Japanese stock holdings in the fund climbed 3.2% while domestic debt, foreign equities, and overseas bonds fell 1.7%, 0.05%, and 5.3%, respectively.
The dollar has long been a solid support for the GPIF’s returns, but with half of the fund’s portfolio in foreign assets, their value was dragged down by the falling dollar. Other holdings were impacted by rising interest rates, and it’s assumed that the GPIF dumped foreign and domestic stocks in favor of bonds in order to rebalance at the end of last year. While the Bank of Japan’s monetary policies put pressure on domestic bonds, the GPIF didn’t shift its allocation, according to the fund’s president Masataka Miyazono. In December, Japanese bonds lost the most in any quarter since 2003, according to Nomura BPI Index data that is cited by Bloomberg. The GPIF allocates its assets evenly across four stock and bond categories, both in Japan and overseas, and though its holdings “were hit by a rise in interest rates as well as a stronger yen…it will have no choice but to stick to its base portfolio,” Hidenori Suezawa of SMBC Nikko Securities told Bloomberg.
Around the globe, both the MSCI All-Country World Index and the S&P 500 climbed 7% or more during the fourth quarter of 2022, and the Topix index rose 3%. At the same time that Japanese government bonds shot up 17 basis points, 10-year US Treasuries saw their yields go up nearly 5 basis points, Bloomberg reports.