These Are The Top Stock Holdings Of The World's Biggest Pension Fund

After three consecutive quarters of losses, the world's biggest pension funds, Japan's Government Pension Investment Fund, posted its first modest profit in the third quarter ended Sept. 30, providing a reprieve to the state money manager after it had come under attack in recent quarter for taking on too much risk by taking on too much exposure in risky assets.

The GPIF returned an annualized 1.8%, or 2.4 trillion yen ($21 billion) in the third quarter, boosting assets to 132.1 trillion yen, or roughly $1.17 trillion at today's exchange rate, it reported on Friday. Domestic and foreign equities added 3.1 trillion yen as they recovered from their Brexit rout, outweighing a loss of 706.9 billion yen on bond holdings. Even with the modest rebound, the fund's cumulative profits since fiscal 2001 remained over 8 trillion yen below its recent all time high gains achieved at the end of fiscal 2014 when it had generated cumulative profits of 50.7 trillion yen.

As reported previously, and as Bloomberg points out, the fund had lost than 15 trillion yen over the last three quarters, wiping out all investment gains since it overhauled its strategy in 2014 by boosting shares and cutting debt. The good news for the GPIF is that thanks to Donald Trump's victory, which has unleashed a historic plunge in the Yen, and corresponding spike in the Nikkei, the GPIF will likely report further gains in Q4, quieting complaints at home that GPIF’s investing approach is too dangerous, assuming of course that there is no dramatic reversel in the recent USDJPY gains which have come on expectations of future rate hikes by the Fed in light of Trumpflation.

“It’ll take some pressure off,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “This quarter will probably be good too. But before we all get too excited, we need to be wary about whether this can continue for long.”

The fund's holdings have recently become a topic of political discussion, with opposition lawmaker Yuichiro Tamaki claiming in an interview earlier this month that the GPIF’s purchases of stocks are a “gamble,” after an almost 20% drop in Japan’s Topix index in the first half of the year. Shinzo Abe has countered that the fund’s short-term losses aren’t a problem for Japan’s pension finances.

The GPIF's holdings of domestic bonds, which have been mauled in the past three weeks, posted a 1.3% loss in the three months through September after yields rebounded; they will likely record even greater losses in Q4. The decline has reduced Japanese debt held by the GPIF to 36% of holdings, fractionally above the target allocation of 35% meaning that the fund will have little leeway to purchase more equities absent another change in the fund's asset allocation.

According to a detailed breakdown provided by the fund in excel form (a first), local stocks made up 22% of GPIF’s portfolio at the end of September, while foreign shares accounted for 21%. That compares with targets of 25 percent for each. Based on Bloomberg calculations, the GPIF delivered a 7.1% gain on domestic stocks in Q3, beating a 6.2 percent rebound in the Topix during the period.  Returns from overseas assets were muted by a stronger yen, which rose 1.8 percent against the dollar in the quarter. GPIF’s international stocks gained 3.7 percent, while foreign bonds lost 0.2 percent as yields rose amid speculation the U.S. will tighten borrowing costs.

Among international stocks, Apple, Microsoft and Exxon were the GPIF's top stock investments at the end of September, while Japanese government bonds, U.S. Treasuries and Italian debt were the largest bond holdings.

The full breakdown of the GPIF's holdings in excel format can be found here, while the list of the top 100 international equity holdings is listed in the table below.

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