August 4, 2017 / 7:50 AM / a year ago

UPDATE 1-Japan's GPIF returns rebound in Q1 on global stock rally

* GPIF returns rebound in fiscal Q1 from loss in previous year

* Global stock rally and shift to riskier assets boost returns

* GPIF racked up loss a year earlier on stock turmoil (Adds GPIF president’s comments)

By Junko Fujita

TOKYO, Aug 4 (Reuters) - Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, rebounded from a loss a year earlier and posted a positive 3.54 percent return on its investments in the fiscal first quarter boosted by a rally in global stock markets.

GPIF, which managed 149 trillion yen ($1.35 trillion), reported on Friday a gain of 5.1 trillion yen in the quarter ended June.

In the same period a year earlier, GPIF posted a negative return of 3.88 percent, or a loss of 5.2 trillion yen, due to a tumble in global stocks.

The latest results show GPIF’s shift to riskier assets continued paying off. In 2014, GPIF made a historic change by cutting its reliance on domestic bonds and increasing weightings of riskier assets.

“The market environment was good in the April-June quarter so we made a positive return,” GPIF President Norihiro Takahashi was quoted saying in a statement, citing the rally in global equities and a weaker yen.

The yen weakened after the Federal Reserve raised rates in June, and also on investor expectations the European Central Bank would normalise monetary policy earlier than initially thought, he said.

Japan’s benchmark Nikkei 225 gained 5.9 percent during the quarter on investors’ confidence that Japanese companies would post strong earnings.

Global stock markets rose after Emmanuel Macron’s victory in France’s presidential election eased investors’ fears of political turmoil in Europe.

GPIF said its Japanese stock portfolio made a 6.59 percent return, while its foreign stock portfolio posted a 5.48 percent return.

Its domestic bond portfolio made a negative return of 0.01 percent in the quarter as yields for the 10-year government bonds stayed flat, GPIF said.

The pension fund said its foreign bond holdings made a 4.45 percent return as the yen weakened against the euro during the quarter.

GPIF’s Japanese stock holdings accounted for 24.41 percent of its assets, while its domestic bond portfolio made up 30.48 percent, it said.

The pension fund allocated 23.91 percent to foreign stocks in the quarter and 13.53 percent to foreign bonds. The remaining 7.67 percent was held mainly in cash.

$1 = 110.0500 yen Editing by Jacqueline Wong

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