TOKYO • The world's biggest pension fund posted the biggest quarterly gain in its history as Japanese stocks surged and a plunge in the yen boosted overseas investments after Mr Donald Trump's victory in the US presidential elections.

The Government Pension Investment Fund (GPIF) returned 8 per cent, or 10.5 trillion yen (S$130 billion), in the three months ended Dec 31, increasing assets to 144.8 trillion yen, it said yesterday.

Domestic equities added 4.6 trillion yen after the benchmark Topix index recorded its best quarterly performance since 2013, outweighing a loss on Japanese bond holdings. Foreign stocks and debt jumped as the yen fell the most against the US dollar in more than two decades.

The Japanese retirement fund's second straight quarterly gain is a welcome respite after it posted losses that wiped out all investment returns since overhauling its strategy in 2014 by buying more shares and cutting debt.

GPIF, which has more than 80 per cent of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.

"They must be breathing a sigh of relief," said Shinkin Asset Management chief fund manager Naoki Fujiwara. "It's going the way the government envisioned, with expected inflation rates rising and a movement from bonds into stocks in the market. The results were good."

Japanese shares returned 15 per cent over the three months, matching a 15 per cent gain in the Topix.

Overseas stocks added 16 per cent, largely due to a 13 per cent drop in the yen against the greenback, the biggest such decline since 1995, which increases the value of foreign holdings when repatriated.

GPIF "invests with a long-term perspective and isn't swayed by short-term market moves", president Norihiro Takahashi said in a statementyesterday.

The fund's domestic bonds fell 1.1 per cent for a second quarterly loss, bringing holdings to 33 per cent of assets, as an index of Japanese government debt fell 1.6 per cent.

Foreign bonds added 8.8 per cent, accounting for 13 per cent of GPIF's investments at the end of last year. Japanese stocks made up 24 per cent of holdings, while overseas equities were 23 per cent of assets. The target levels for GPIF's portfolio are 35 per cent for domestic debt, 15 per cent for foreign bonds and 25 per cent each for domestic and overseas shares.

Alternative assets accounted for less than 0.1 per cent of GPIF's holdings.

BLOOMBERG