Japan’s Government Pension Investment Fund (GPIF) made a negative return on investments of -1.91% in the first quarter (Q1) of its fiscal year 2022 (FY2022) starting April 1, according to numbers released on August 5.
The biggest factor in this performance was its portfolio of foreign equities, which made a negative return of -5.36%, followed by domestic equities (-3.68%) and domestic bonds (-1.31%). GPIF’s portfolio of foreign bonds counterweighted the overall negative performance with a return of 2.71%.
The performance setback takes the world’s largest pension fund’s total assets to ¥193 trillion ($1.5 billion), which is still larger than its Q1 FY2021 performance, when GPIF’s total assets stood at ¥191.6 trillion.
The relatively large drop in performance in overseas equities is no surprise, given the turmoil in global markets during the second quarter of 2022 following inflation, hikes of interest rates in several countries, as well as the ongoing war in Ukraine and its repercussions.
In countering the current development in markets, GPIF is seeking to reduce the balance of its actively managed equity — which constitutes a minority of its total holdings — by ¥2 trillion, and will diversify in the future by increasing the total number of active equity funds, starting in North America.
“Active funds in the North American market currently have the most choices. We are considering the direction of selection as early as possible to promote the diversification effect of active funds,” Eiji Ueda, chief investment officer at GPIF, wrote in the FY2021 annual report published in Japanese in July.
The fund holds the majority of its equity investments in strategies that track indexes. On April 1, Ueda had his term as GPIF CIO extended for another two years to run to March 2024.