August 12, 2021

The world’s largest pension fund, Japan’s Government Pension Investment Fund (GPIF), cooled off to start the fiscal year after returning a record 25.15% for fiscal year 2020.

With an approximately $45.1 billion gain, the $1.7 trillion pension giant shows a 2.68% investment return for the first quarter of fiscal 2021. There are many pension fund owners who would weep with joy at those figures as being indicative of a healthy quarterly gain, but it’s less than half the 5.65% the portfolio returned the previous quarter, and less than one-third of the blistering 8.29% it returned during the year-ago quarter. The performance is also below its quarterly rate of return for the first quarter over the past 20 years, which is 3.70% annualized. But then, COVID wasn’t around 20 years ago was it?

Most of the fund’s asset classes continued their strong 2020 performances to start off the new fiscal year, with the notable exception of domestic equities, which hit the brakes in the first quarter, possibly as a clear result of the global pandemic.

But all things are relative and when considered against the benchmark which lost .33%, the decline of .25% for their domestic equities offers cause for encouragement.

Some of the disappointment in figures must be offset against it decision to reduce its domestic equities holdings by more that $27 billion due to address rebalancing.

Although not at quite the same pace as the previous quarter, Foreign equities remained strong, returning 8.62%, compared with 12.04% in the fourth quarter of 2020, and 20% during the same quarter last year, beating (just) the benchmark’s return of 8.55%.

Read on McDuff, read on……