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Japan's GPIF turns to profit in Q3

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March 2
6:48 AM 2016

The Government Pension Investment Fund (GPIF) of Japan reported an investment profit of ¥4.73 trillion in the third quarter of 2015, compared to an investment loss of ¥7.9 trillion in the previous quarter. The pension fund's net assets totalled ¥139.8 trillion during the third quarter.

The fund reported a 3.56% return in the three-month period of 2015, down from 5.16% in the previous year quarter. The net assets amounted to ¥139.8 trillion in the third quarter, up from ¥137.04 trillion in the same period in 2014.

GPIF's quarterly investment income from market investments was ¥4.71 trillion, compared to an investment loss of ¥7.9 trillion in the second quarter of 2015. Net assets from market investments increased sequentially to ¥135.97 trillion from ¥131.02 trillion in the prior quarter. The Modified return rate for market investments was 3.66%, compared to a negative return rate of 5.79% in the previous quarter.

Investment income from FILP bonds decreased to ¥18 billion from ¥19.1 billion in the second quarter of 2015. Net assets from FILP bonds also declined to ¥3.85 trillion from ¥4.1 trillion in the previous quarter. The rate of return from FILP bonds increased to 0.45% from 0.43% in the prior quarter.

The fund allotted 37.76% of reserve funds to domestic bonds and 23.35% to domestic equities. While the fund allocated 13.50%, 22.82% and 2.57% of reserve funds to international bonds, foreign equities and short-term assets respectively.

According to Hiroyuki Mitsuishi, one of GPIF's councillor, the fund is moving towards losses at the beginning of 2016, but pensions will not be affected as GPIF can manage things in the long run. He added that GPIF will meet pension payments amid the unstable performance due to the present asset mix as reported by Bloomberg.

Shingo Ide, NLI Research Institute's equity strategist, said that the increase in holdings is mainly due to more return from Japanese shares. GPIF earned ¥3 trillion on Japanese shares and ¥1.6 trillion on foreign stocks. The numbers provide relief for Shinzo Abe and his Abenomics supporters. The fund's performance could become more problematic for Abe's Abenomics, Tobias Harris, a political researcher at Teneo Intelligence, said before the release of the results.

In 2014, the fund decided to increase distribution of equity holdings while at the same time lowering investments in government bonds with low returning capacity. According to Reuters' calculations, GPIF sold ¥1.05 trillion in JGBs and purchased about ¥430 billion in Japanese shares during the third quarter of 2015.

The fund's results come amid the global financial crisis and flagging domestic economy. GPIF's performance in the quarter reflects the growth in the investment sector. However, the fund suffered a loss in the second quarter as a result of the global crisis.

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