I thought it was worth noting last week that the largest pension fund in the world ($1.5 trillion AUM) had gone from being a buyer to being a seller of Japanese government bonds.
So does Financial Sense:
The Government Pension Investment Fund, Japan (GPIF) does pretty much exactly what it says on the tin, i.e. it is the pension fund for Japanese public sector employees.
It is also the largest such institution in the world and has assets under management that total a truly staggering ¥108 trillion ($1.5 trillion). To put that sum in perspective, it is roughly the same as the GDP of Canada... or Russia.
The first three quarters of 2011 weren’t so kind to GPIF, unfortunately, and, as at December 31, 2011 (the Japanese fiscal year ends on March 31) their AUM had shrunk by a not insignificant ¥2.87 trillion or 2.54% (to continue the GDP comparison, that is like vaporizing the entire Lithuanian economy in nine months). Not good.
A look at the performance of the various investments held by the GPIF demonstrates just how hard it is to invest in the current environment as they showed losses in domestic stocks (-15%), international stocks (-16%) and international bonds (-4%). Fortunately, the one bright spot in their portfolio happened to be their single largest allocation; domestic bonds, which gained a comparatively whopping 2.5%.
A look at the breakdown of GPIF’s portfolio is highly illustrative:
As you can see, almost 70% of the ¥108 trillion in the GPIF’s coffers is sitting in domestic bonds.
That’s roughly ¥75 trillion or $1 trillion in Japanese bonds which sat quietly on GPIF’s balance sheet.
Historically, GPIF has been one of the largest buyers of Japanese government debt and has done more than its fair share to confound those who have predicted Japan’s day of reckoning; including Kyle Bass who has been waiting an awfully long time for his view on Japan to play out as he expected....MORE