The world’s biggest pension fund posted a gain for a fourth consecutive quarter, with foreign stocks providing the best return among assets amid a thaw in trade tensions between the U.S. and China.
Japan’s Government Pension Investment Fund returned 4.6%, or 7.4 trillion yen ($67 billion), in the quarter ended Dec. 31, with assets totaling 168.9 trillion yen, it said Friday in Tokyo. Foreign stocks were the fund’s best performing investment, gaining 9.7%, while domestic equities added 8.6%. The return was 0.9% for overseas bonds, while Japanese debt incurred a 1% loss.
Domestic debt holdings had their worst performance in more than a year as progress in U.S.-China trade negotiations encouraged investors to shift toward Japanese and foreign equities, while strength in foreign currencies against the yen supported the value of overseas debt.
“Progress made in the U.S.-China trade negotiations supported domestic and foreign equities,” wrote Norihiro Takahashi, president of the pension fund. “Interest rates rose globally, while the yen weakened against the dollar and the euro.”
The fund announced in October that it would give itself leeway to buy more fixed-income securities from outside its home market by classifying currency-hedged foreign bonds as part of its domestic debt.
During the October-December quarter, the MSCI All-Country World Index of global stocks rose 8.6% and the S&P 500 Index gained 8.5%, while the Topix index advanced 8.4%. Yields on 10-year U.S. Treasuries climbed 25 basis points in the period, while benchmark Japanese government bonds yields added about 20 basis points. Japan’s currency weakened 0.5% against the dollar and slid 3.3% against the euro.
The GPIF has a general target to keep 25% of its basic portfolio in domestic stocks and 25% in overseas shares. The permissible range of deviation is 9% for local equities and 8% for stocks abroad. The target is 35% for domestic bonds and 15% for foreign debt, with a permissible deviation of 10% and 4%, respectively.
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