GPIF, world's biggest pension fund, gains US$21 billion in Q3

TOKYO (BLOOMBERG) - The world's biggest pension fund posted its first profit in four quarters as stocks rebounded, providing some respite for the Japanese state money manager after critics lambasted it for taking on too much risk.

The Government Pension Investment Fund returned 1.8 per cent, or 2.4 trillion yen (S$29.9 billion) in the three months ended Sept 30, boosting assets to 132.1 trillion yen, it said in Tokyo on Friday. Domestic and foreign equities added 3.1 trillion yen as they recovered from their Brexit rout, outweighing a loss of 706.9 billion yen on bond holdings.

The profit comes after the fund lost more than 15 trillion yen over the previous three quarters, wiping out all investment gains since it overhauled its strategy in 2014 by boosting shares and cutting debt. As Japanese stocks extend their advance and US equities climb to fresh records after Donald Trump's election win, the prospect of further strong performance may help quash complaints at home that GPIF's investing approach is too dangerous.

"It'll take some pressure off," said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. "This quarter will probably be good too. But before we all get too excited, we need to be wary about whether this can continue for long."

Prime Minister Shinzo Abe said in parliament in September that the fund's short-term losses aren't a problem for Japan's pension finances. GPIF's purchases of stocks are a "gamble" opposition lawmaker Yuichiro Tamaki said in an interview that month, after an almost 20 per cent drop in Japan's Topix index in the first half of the year was followed by a 7.3 per cent one-day plunge after Britain's shock vote to leave the European Union.

Domestic bonds, the only asset class to deliver a profit in the fiscal year ended March, posted a 1.3 per cent loss in the three months through September after yields rebounded. That reduced Japanese debt to 36 per cent of holdings, compared to a target allocation of 35 per cent. Yields on 10-year bonds climbed to minus 0.085 per cent at the end of September from negative 0.23 per cent at the end of June.

Local stocks made up 22 per cent of GPIF's portfolio at the end of September, while foreign shares accounted for 21 percent. That compares with targets of 25 percent for each. GPIF delivered a 7.1 per cent gain on domestic stocks, beating a 6.2 per cent rebound in the Topix during the period.