World’s Largest Pension Fund Posts $4.5 Billion Quarterly Loss

A morning commuter in Tokyo.

(Bloomberg) -- Japan's state pension fund, the world's largest, posted a loss of ¥683.2 billion ($4.5 billion) on total assets during the three months through September as its holdings of domestic debt slumped by a record.

The Government Pension Investment Fund lost 0.3% during the quarter, the fund said in Tokyo Thursday. Total assets rose slightly to ¥219.32 trillion due to a transfer of funds from the government's account that manages its pension, according to a spokesperson. Domestic bonds lost 2.7%, the most since the fund's predecessor started investing in 2001. Japanese stocks returned 2.5%.

Strength in the dollar against the yen supported overseas assets. The GPIF's holdings of shares abroad lost 0.1%, while its non-Japanese bonds lost 0.8% as the dollar gained more than 3% against the yen during the period.

With about one-fourth of the fund's assets consisting of domestic bonds, the latest loss illustrates the growing risk of holding the securities as the Bank of Japan slowly moves away from its ultra-loose monetary policy. Yields on benchmark 10-year bonds hit a fresh decade high this week after the central bank adjusted its stimulus to allow long-term yields to edge higher.

“We will make investments from a long-term perspective and fulfill our fiduciary duty to leave funds to support our pension system,” Masataka Miyazono, president of the fund, said in a statement.

During the three months ended September, the MSCI global stock index fell 3.8% and the S&P 500 Index slid 3.7%, while the Topix gained 1.5%. Yields on 10-year US Treasuries rose 73 basis points in the period, while benchmark Japanese government bond yields added 37 basis points.

(Adds details on increase in assets in second paragraph. Previous story was corrected to say total assets rose.)

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