Japan Pension Fund Rides Stocks to $46 Billion Gain

The world’s biggest pension fund posted its fourth-straight quarterly gain, as global stocks rose and a decline in the yen against both the dollar and the euro helped boost the value of its overseas investments.

The Government Pension Investment Fund returned 3.5%, or 5.1 trillion yen ($46 billion), in the three months ended June 30, increasing assets to a record 149.2 trillion yen, it said in Tokyo on Friday. Domestic equities added 2.3 trillion yen as the benchmark Topix index rose in the period, while the value of foreign stocks increased by 1.9 trillion yen, Bloomberg reported.

The Japanese retirement fund’s recent string of quarterly gains follows a series of losses after it overhauled its strategy in 2014 to buy more shares and cut debt. GPIF, which holds the majority of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.

“With stronger stocks, we’re not seeing a repeat of trillions of yen of paper losses that we saw in the past,” said Ayako Sera, a market strategist with Sumitomo Mitsui Trust Bank Ltd. in Tokyo. “Performance is improving, but we still have to maintain a calm view.”

The fund’s Japanese share holdings returned 6.6% over the three months, matching the Topix’s performance. Overseas stocks added 5.5%, helped by a 7.6% drop in the yen against the euro, the biggest decline since 2013, as well as weakness versus the greenback, both of which increase the value of foreign holdings when repatriated. The MSCI All-Country World Index climbed 3.6% last quarter.

“A positive market environment continued” in the June quarter, with good global economic data and corporate earnings supporting increases in stocks, GPIF President Norihiro Takahashi said in a statement Friday. “The yen was in a weakening trend due to expectations that the Federal Reserve will raise interest rates and the ECB will move toward normalizing monetary policy, while the Bank of Japan’s quantitative easing policy continued.”

The fund’s domestic bond holdings, which accounted for 30.5% of total assets, managed a nearly flat return. Foreign bonds added 4.5%, making up 13.5% of the GPIF’s investments at the end of June.

Japanese stocks accounted for 24.4% of holdings, while overseas equities were 23.9% of assets. The target levels for GPIF’s portfolio are 35% for domestic debt, 15% for foreign bonds, and 25% each for domestic and overseas shares.