11/07/2022, 14.13
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Third-quarter losses for the world's largest pension fund

by Guido Alberto Casanova

Not since the financial crisis of 2008-2009, has Japan’s Government Pension Investment Fund experienced such losses. Yet, it remains one of the most important institutional investors in financial markets. Despite the crisis, investments in Japanese start-ups will continue.

Tokyo (AsiaNews) – Japan’s Government Pension Investment Fund (GPIF) released economic data for the second quarter last Friday, reporting a loss for the third time in a row, something that has not happened since 2009, when the country was grappling with the global financial crisis.

Dubbed the “whale” because it is the largest pension fund in the world and one of the most important institutional investors in financial markets, the GPIF manages 192 trillion yen of assets (about US$ 1.31 trillion), almost as big as Indonesia's gross domestic product.

Data released last week for the third quarter (July-September) indicate total losses of 1.72 trillion yen or US$ 11.6 billion.

Each of the four segments into which the fund’s investments (Japanese bonds and foreign stocks) are divided, were in the red, losing 0.88 per cent of their value.

The worst performance was by foreign bonds, with a loss of 764.4 billion yen, due to higher interest rates by the US Federal Reserve, which raised the yields of newly issued bonds while depressing the value of those issued previously.

Losses in the second quarter were lower than in the first, when the pension fund lost 1.91 per cent of its value. Between April and June, the value of GPIF investments fell by 3.75 trillion yen (US$ 28.13 billion). In the last quarter of 2021, the loss was 1.1 per cent.

The negative trend does not seem to have yet put a brake on investments; in recent months, the Nikkei magazine reported that the GPIF is planning to invest tens of millions of dollars in Japanese start-ups.

This would be a first ever for the government fund. At present, the share of pension funds in the Japanese venture capital market represents only 3 per cent of the total, compared to 32 per cent in the United States.

If GPIF investments in Japan's still underdeveloped start-up ecosystem were to take hold, other pension funds could follow suit, thus boosting a positive trend for Japan’s entire economic system.

Advancing the start-up sector was also one of the goals of Prime Minister Fumio Kishida's much vaunted "new capitalism". Yet, the spectre of losses remains a concern that pension fund investors will continue to face in the coming months.

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