Portfolio value at Japan’s GPIF softens in Q2

While the world’s largest pension fund sees main asset classes dwindle, its alternatives share is growing on the margin.
Portfolio value at Japan’s GPIF softens in Q2

Japan’s Government Pension Investment Fund (GPIF) made a negative return on investments of -0.88% for July through September, the second quarter (Q2) of its fiscal year 2022 (FY2022) starting April 1, according to figures released on November 4.

The biggest factor in this performance was its portfolio of foreign bonds which made a negative return of -1.54%. That was followed by domestic equities (-0.84%), domestic bonds (-0.79%) and foreign equities (-0.49%).

The performance setback takes the world’s largest pension fund’s total assets to ¥192.1 trillion ($1.3 trillion), which is just over 1% lower than its Q2 FY2021 performance, when GPIF’s total assets stood at ¥194.1 trillion.


With decreased value across public market assets and continuing expansion of GPIF's alternatives investments, alternatives now take up 1.47% of total AUM, an increase from 0.82% by Q2 FY2021.

The cap on alternatives allocation is 5% of total AUM.

In October, GPIF awarded its second global real estate mandate to LaSalle Investment Management to run a core global real estate fund-of-funds strategy. Mizuho Trust & Banking will act as gatekeeper and the mandate would pursue co-investments, joint ventures and club deals.

The pension fund offered no details on the size of allocation that would be made to LaSalle. GPIF awarded its first global real estate fund-of-funds mandate to CBRE Global Investment Partners in 2018, with local Asset Management One as gatekeeper.

Also read: Japan’s GPIF eyes more alternatives after promising returns


The relatively large drop in performance in overseas equities is no surprise, given the turmoil in global markets during 2022 following inflation, interest rates hikes in several countries, as well as the ongoing war in Ukraine and its repercussions.

As of end-FY 2021, GPIF was investing in the active foreign equity funds of seven companies, all of which underperformed their manager benchmarks for the year. The correlation of each fund’s excess returns increased and market volatility rose sharply during the second half of the fiscal year.

Therefore, GPIF reduced its active fund balance — which constitutes a minority of its total holdings — by a total of approximately ¥2 trillion for risk management reasons. To avoid a concentration of fund allocations and to achieve diversification in the equity portfolio, GPIF found it necessary to increase the number of active funds the pension fund employs.

Eiji Ueda, GPIF

“For this purpose, GPIF has proceeded with the selection of active funds in the North American market, which offers the greatest number of options. GPIF will move to achieve a diversification effect among its active funds as fast as possible,” Eiji Ueda, chief investment officer at GPIF, wrote in the FY2021 annual report published in July.

The fund holds the majority of its equity investments in strategies that track indexes. On April 1, Ueda had his term as GPIF CIO extended for another two years to run to March 2024.

Also read: Japan’s GPIF revamps equity strategy amid uncertain global markets

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