The results are painful for the fund that owns more than 5 percent of the domestic stock market.
Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, has just announced its investment results for the first quarter of fiscal year 2016, which showed its worst performance since the global financial crisis, with losses exacerbated by unfavourable currency moves and a foray into equity markets.
Portfolio losses for Japan's $1.3 trillion GPIF in the three months ending June 30, 2016, amounting to 5.2 trillion yen ($52 billion), or 3.9 percent, which effectively wiped out all the gains that the fund made since it revised its investment strategy to place a heavier weighting on equities.
Government Pension Investment Fund decided in October 2014 to take a more aggressive investment stance, shifting towards stocks and away from low-yielding Japanese government bonds, in line with a surge in Japanese equities and a weaker yen earlier in Prime Minister Shinzo Abe’s term. Opponents accused Abe’s government of favoring the stock market and their own approval ratings over pension security.
The Q1 FY 2016's loss follows a 5.3 trillion-yen drop ($68 billion) in the year ended March 31, 2016, the worst annual performance since the global financial crisis when the fund lost 7.6 percent in the 12 months ending March 2009.
In a press briefing in Tokyo after the results were announced, Norihiro Takahashi, the president of GPIF, blamed the quarterly investment loss on the surging yen following the Brexit event. He said: “We invest with a long-term view. Even if market prices fluctuate in the short term, it won’t damage pension beneficiaries. We are also strengthening Risk Management and continuing to hire experts.”
“The results of the UK’s referendum turned out to be different from what the market expected. And US unemployment data in May was much worse than forecast,” he added.
Asset weightings
While GPIF's losses can be mostly attributed to rocky markets and an index-hugging investment approach, the second reason, the Brexit, could be the main contributor as the vote results, which were announced less than a week before the end of the quarter, produced a 7 per cent plunge in the main Japanese stock benchmark, Topix. Furthermore, Topix was already broadly in the red before the UK’s referendum, falling 8 per cent in the first quarter before clawing back 3 per cent by the end of June.
As of June 30, 2016, the GPIF had 42 percent of its 129.7 trillion-yen ($1.3 trillion) portfolio in Japanese and global stocks while foreign and domestic bonds accounted for 52 percent of its assets. However, the fund targets allocations of 25 per cent each for Japanese and overseas stocks, 35 per cent for local bonds and 15 per cent for offshore debt.
During the reported quarter, the fund lost 9.6 percent on foreign shares and 3.3 percent on overseas debt, while Japanese bonds handed the fund a 4.1 per cent gain.
Further losses expected
The fund's mega-losses are likely to continue in the current quarter if Japanese stocks resumes their current slide. The Nikkei Stock Average has shed more than 13 percent since the beginning of the year, and fell 1.18 percent Friday.
The biggest risk would also be coming from the stronger yen which benefited from major central banks’ recent decisions to hold off easing policy. The USD/JPY is currently hovering around the 100.0 psych level, bringing its gain this year to about 17 percent, with further risks to the downside.
Strength of the yen helped amplify losses to the GPIF’s portfolio in the April-June quarter. And while Abenomics are not expected to change anytime soon, this fact may bring the idea of hedging the fund’s currency exposure to the table. In practice, this would involve taking positions to at least offset declines in the value of the currencies in which investments are held.
Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, has just announced its investment results for the first quarter of fiscal year 2016, which showed its worst performance since the global financial crisis, with losses exacerbated by unfavourable currency moves and a foray into equity markets.
Portfolio losses for Japan's $1.3 trillion GPIF in the three months ending June 30, 2016, amounting to 5.2 trillion yen ($52 billion), or 3.9 percent, which effectively wiped out all the gains that the fund made since it revised its investment strategy to place a heavier weighting on equities.
Government Pension Investment Fund decided in October 2014 to take a more aggressive investment stance, shifting towards stocks and away from low-yielding Japanese government bonds, in line with a surge in Japanese equities and a weaker yen earlier in Prime Minister Shinzo Abe’s term. Opponents accused Abe’s government of favoring the stock market and their own approval ratings over pension security.
The Q1 FY 2016's loss follows a 5.3 trillion-yen drop ($68 billion) in the year ended March 31, 2016, the worst annual performance since the global financial crisis when the fund lost 7.6 percent in the 12 months ending March 2009.
In a press briefing in Tokyo after the results were announced, Norihiro Takahashi, the president of GPIF, blamed the quarterly investment loss on the surging yen following the Brexit event. He said: “We invest with a long-term view. Even if market prices fluctuate in the short term, it won’t damage pension beneficiaries. We are also strengthening Risk Management and continuing to hire experts.”
“The results of the UK’s referendum turned out to be different from what the market expected. And US unemployment data in May was much worse than forecast,” he added.
Asset weightings
While GPIF's losses can be mostly attributed to rocky markets and an index-hugging investment approach, the second reason, the Brexit, could be the main contributor as the vote results, which were announced less than a week before the end of the quarter, produced a 7 per cent plunge in the main Japanese stock benchmark, Topix. Furthermore, Topix was already broadly in the red before the UK’s referendum, falling 8 per cent in the first quarter before clawing back 3 per cent by the end of June.
As of June 30, 2016, the GPIF had 42 percent of its 129.7 trillion-yen ($1.3 trillion) portfolio in Japanese and global stocks while foreign and domestic bonds accounted for 52 percent of its assets. However, the fund targets allocations of 25 per cent each for Japanese and overseas stocks, 35 per cent for local bonds and 15 per cent for offshore debt.
During the reported quarter, the fund lost 9.6 percent on foreign shares and 3.3 percent on overseas debt, while Japanese bonds handed the fund a 4.1 per cent gain.
Further losses expected
The fund's mega-losses are likely to continue in the current quarter if Japanese stocks resumes their current slide. The Nikkei Stock Average has shed more than 13 percent since the beginning of the year, and fell 1.18 percent Friday.
The biggest risk would also be coming from the stronger yen which benefited from major central banks’ recent decisions to hold off easing policy. The USD/JPY is currently hovering around the 100.0 psych level, bringing its gain this year to about 17 percent, with further risks to the downside.
Strength of the yen helped amplify losses to the GPIF’s portfolio in the April-June quarter. And while Abenomics are not expected to change anytime soon, this fact may bring the idea of hedging the fund’s currency exposure to the table. In practice, this would involve taking positions to at least offset declines in the value of the currencies in which investments are held.
Noel Quinn's Surprise Exit Marks End of an Era at HSBC
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
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Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
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#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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