(Bloomberg) – The world’s largest pension fund posted a record loss in the first three months of 2020 after the coronavirus pandemic caused a global market crash in the period.
The Government of Japan Pension Investment Fund lost 11%, or 17.7 trillion yen ($ 164.7 billion), in the three months ending March, it said in Tokyo on Friday. The decline in value was the steepest according to comparable data through April 2008, reducing the fund’s total assets to 150.63 trillion yen. Foreign stocks were the worst performing investment, followed by domestic stocks.
The results come just a few months after the fund renewed senior management and revised its asset allocation to focus more on external debt. The loss, which wiped out the earnings for the fiscal year, may attract political attention, as social security remains a major concern for tens of millions of retirees in Japan.
“The decline in domestic and foreign stocks led to a negative performance for the fiscal year,” said Masataka Miyazono, president of GPIF. “Both equity markets performed strongly during 2019, even under the pressures of the US-China trade negotiations. The global coronavirus pandemic led investors to take a risky position. ”
Foreign bonds were the only major asset that generated a positive quarterly return. The stocks gained 0.5%, compared to losses of 0.5% for domestic bonds, 18% for local stocks, and 22% for foreign stocks. In April, GPIF increased its asset allocation to foreign bonds by 10 percentage points to 25%, while keeping the target for foreign and domestic stocks unchanged at 25%.
Naoki Fujiwara, the chief fund manager of Shinkin Asset Management Co., said the losses were expected. The shares have recovered since March, so the pension fund should be recovering losses for the period from April to June, Fujiwara said. “The current portfolio is exposed to equity volatility,” he said. “We are in an underperforming environment right now, and it probably will be for the next two years, so maybe it is fine for now, but in the long run, the pension fund should correct the allocation of shares.”
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Under new guidance from GPIF chairman Miyazono and chief investment officer Eiji Ueda, the fund must navigate a volatile market torn between an ongoing coronavirus pandemic and promises of economic stimulus measures. Fears of a second wave of outbreaks are already hampering the recovery of global equity markets.
The GPIF is in no rush to buy foreign bonds, which are 3% below their allocation target, Miyazono told reporters in Tokyo. The fund has a long-term investment term much longer than 10-20 years, he said, adding that there will be no impact on pension payments from the results of a single year.
Investments in ESG indices hit a record 5.7 trillion yen. GPIF, a leader in socially responsible investment, has invested in indices such as FTSE Blossom Japan, MSCI Japan ESG Select Leaders and MSCI Japan Empowering Women.
During the January-March quarter, the MSCI All-Country World index of global equities fell 22%, the worst since the global financial crisis. Yields on 10-year US Treasury bonds fell 125 basis points to near-record lows over the same period, fueled by unprecedented measures by the US Federal Reserve And intense demand for assets. of refuge.
As of April, the GPIF has adjusted its portfolio, setting an overall target to maintain 25% each across the four asset classes, and the allocation of each asset may deviate in different ranges.
(Add second graph, ESG holdings in the tenth paragraph)
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