World's biggest pension fund from Japan reports record $183b loss amid market turmoil

Japan's Government Pension Investment Fund lost 9.1 per cent, or 14.8 trillion yen (S$183.34 billion), in the three months ended Dec 31.
Japan's Government Pension Investment Fund lost 9.1 per cent, or 14.8 trillion yen (S$183.34 billion), in the three months ended Dec 31.PHOTO: REUTERS

TOKYO (BLOOMBERG) - The world's biggest pension fund posted a record loss after a global equity rout last quarter pummeled an asset class that made up about half of its investments.

Japan's Government Pension Investment Fund lost 9.1 per cent, or 14.8 trillion yen (S$183.34 billion), in the three months ended Dec 31, it said in Tokyo on Friday (Feb 1). The decline in value was the steepest based on comparable data back to April 2008. Domestic stocks were the fund's worst performing investment, followed by foreign equities.

While stocks helped the GPIF generate returns for the previous two fiscal years, December's global rout underscored the risks facing the fund since it revamped strategy in 2014 to accumulate stocks and pare domestic bonds.

The GPIF may have little choice but to invest in equities as fixed-income yields, especially those of Japanese government debt, are too low, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co in Tokyo.

"It makes a sense for the GPIF to hold some risk assets in this environment because yields are low globally and bond investments don't give good returns," Fujiwara said. "Yet from a pensioner's point of view, it takes too much risk on its investments."

More than US$10 trillion in equity value was wiped out from the global markets last quarter as an ongoing trade spat between the US and China raised concern over a slowdown in growth.

The Topix index plunged 18 per cent in the October-December period, the biggest quarterly decline since 2008, while the S&P 500 Index dropped 14 per cent, the most since 2011. Japan's currency strengthened 3.7 per cent against the dollar in the quarter.