Conservative overweighting hinders world’s largest investor

An overweight allocation to domestic bonds has not helped the world’s largest investor in the June quarter, with a massive $42 billion shaved off the assets of the ¥116,802 billion ($1.37 trillion), Government Pension Investment Fund of Japan (GPIF).

The fund’s ¥10 trillion exposure to international equities was the main contributor to the negative performance, with that asset class returning -17.43 per cent. Domestic stocks, also underperformed with a -13.93 per cent return for the quarter.

The GPIF has a 72 per cent allocation to domestic bonds, up slightly from the year before, and above its target position of 67 per cent. It also has another 8 per cent in international bonds.

The fund has allocations of 10.87 per cent in domestic equities and 9.11 per cent in international equities, and is most underweight in short-term assets, where its target is 5 per cent, and its allocation is short of 1 per cent.

Last financial year, ending March 31, international equities were the main positive contributor to performance, with a massive 46.11 per cent. The total fund return for the year was 7.9 per cent

Most of the assets are managed passively, and last financial year (ending March 31, it reduced its weighting to actively managed international equities, widening the number of service providers at the same time.

Overall the fund employs more than 80 funds managers.