Japan’s Government Pension Investment Fund (GPIF), the world’s largest, posted another quarterly loss, marking four losing quarters - its longest losing streak in two decades.
Yet the state pension fund only lost close to 1% (0.97%) during the quarter that ended December 31 2022, the third quarter of its fiscal year that ends in March, GPIF announced on February 3.
The ¥1.85 trillion ($14.4 billion) loss reduced its total assets to ¥189.9 trillion.
The latest string of losses is the longest since the fund posted four consecutive quarters of declines during the fiscal year that ended March 31 2003.
Its Japanese equity holdings rose 3.24% during the period while domestic bonds lost 1.73%. The foreign equities portfolio went down 0.05%, while overseas bonds fell 5.32%.
The value of foreign assets that make up about half of the fund’s portfolio was hit by the dollar's decline in value against other major currencies, and was split between 24.27% for foreign equities and 24.59% for foreign bonds as of Q3 FY2022.
Holdings of Japanese debt saw more losses after the Bank of Japan abruptly revised its yield-curve-control policy in December 2022.
The share of alternative investments dropped to 1.43% after accounting for a 1.47% share in Q2 FY2022.
In absolute terms, the value of alternatives dropped to ¥2.71 trillion from ¥2.82 trillion the previous quarter, with the depreciated US dollar against the yen playing a substantial role in the lowered valuation.
The cap on alternatives allocation in GPIF’s portfolio is 5% of total AUM.
OVERSEAS EQUITY REVAMP
On January 10, GPIF announced a restructuring of its manager lineup for active foreign equities, with 19 new mandates heavily weighted to US-based asset managers.
Eiji Ueda, chief investment officer, had said in GPIF's annual report for the fiscal year ended March 31 2021 that changes to the fund's approach to active foreign equities would be forthcoming following underperformance by its seven incumbent active managers.
GPIF had 2.37% of its portfolio — or ¥4.7 trillion — allocated to active foreign equities at the end of FY2021, with weak performance prompting the withdrawal of roughly ¥2 trillion for risk management reasons during the year.
“Active funds in the North American market currently have the most choices. We are considering the direction of selection as early as possible to promote the diversification effect of active funds,” Ueda wrote in the FY2021 annual report.
The fund holds the majority of its equity investments in strategies that track indexes. On April 1 2022, Ueda's term as GPIF CIO was extended by another two years until March 2024.