TOKYO -- As the British vote to exit the European Union roils the market, the eroding value of the Government Pension Investment Fund's assets is raising questions about a 2014 portfolio reshuffling that increased its exposure to equities.
Assets managed by the public pension fund shrank an estimated 5 trillion yen ($48.7 billion) by market value in the April-June quarter, according to Masahiro Nishikawa, chief fiscal policy analyst at Nomura Securities. Nishikawa arrived at this figure after comparing prices at the end of March and the end of June.
GPIF holdings of domestic bonds likely gained 1.3 trillion yen in value thanks to higher prices amid the Bank of Japan's negative interest rates. But the fund's domestic stocks likely lost 2.2 trillion yen in value, and its foreign stocks 2.5 trillion yen. Foreign bonds apparently shed 1.6 trillion yen.
The Brexit vote and the yen's sharp appreciation are largely to blame.
The Nikkei Stock Average finished June at 15,575, down more than 1,100 points from three months before. And the Japanese currency strengthened by nearly 10 to the dollar. Yen-denominated assets abroad declined in value.
The GPIF is to announce its fiscal 2015 investment returns July 29. The likely loss of well over 5 trillion yen -- the first annual loss since fiscal 2010 -- is due mainly to stock declines.
The fund had increased the weighting of domestic and foreign stocks from 12% each to 25% back in October 2014, aiming to boost returns.
Cumulative gains since fiscal 2001, when the GPIF began managing assets on its own, have reached some 40 trillion yen. Around 60%, or 23 trillion yen, was created after Shinzo Abe returned as prime minister.
In the final stretch of the upper house race, opposition party figures are criticizing the GPIF for the asset reallocation and for waiting until after the July 10 vote to announce its returns.
The government maintains that pension assets are managed for the long term and thus should not be looked at over shorter periods. With the yen likely to stay strong and stocks cheaper, asset management will remain a tough task for some time, Nishikawa said.