World’s biggest pension fund loses $64 bn on stock rout

Japan's Government Pension Investment Fund (GPIF), the world's biggest retirement fund, registered a ¥7.9-trillion ($64-billion) loss in the second fiscal quarter ended September due to global stock market slump, posting its biggest loss in seven years.

Much of the fund's fall was triggered by the plunge in Chinese stock market, which was followed by other global stock markets, as concerns over a continuing slowdown in China, the world's second-largest economy, deteriorated investor sentiment.

GPIF lost about 5.6 per cent of its value to ¥135 trillion ($1.1 trillion). The fund's Japanese equities fell 12.8 per cent, while its international share holdings lost 11 per cent of their value, according to a statement released yesterday.

''The volatility of short-term profits may have increased, but from a long-term perspective the risk of a shortfall in pension assets has decreased,'' said Yoshihide Suga, the government's chief cabinet secretary.

Last year, the fund took a riskier strategy to invest about 50 per cent in equities, as part of Prime Minister Shinzo Abe's economic reforms, to generate higher returns for the country's rapidly growing pension bill.

Japan is the fastest ageing nation in the world, with more than a quarter of the country's population aged over 65. The percentage is expected to grow to 40 per cent by 2060.

The investment came to about 43 per cent as at the end of September. The equity exposure is about half in the domestic market with the remaining in international market.

The fund has nearly 53 per cent invested in bonds, predominantly domestic, and the over 4 per cent in short term assets.

The pension fund has generated an overall negative return of 3.8 per cent in the first two quarters. For the last fiscal year, the returns were high at 12.3-per cent, on the back of weakening yen and stock market rally.

The Japanese fund is not the only one affected by the stock market rout in recent months. Norway's sovereign wealth fund lost 4.9 per cent to $39 billion in the third quarter.