Tokyo: Losses for the world’s biggest pension fund likely deepened in the quarter just ended, extending what may be its worst annual loss since the global financial crisis, brokerage estimates showed.

Japan’s Government Pension Investment Fund will probably post a 4.4 trillion yen ($43 billion) loss in the April-June quarter, according to calculations by Yohei Iwao, executive director of the institutional equities division at Morgan Stanley MUFG Securities Co. That follows what he estimates was a 5 trillion yen decline in the fiscal year ended March 31, which would amount to the worst performance since fiscal 2009 when the fund lost 9.7 trillion yen.

The calculations come amid criticism the government has put the public’s pension money at risk after the fund known as the whale for the size of its assets increased its equity allocations in 2014. That’s prompted the main opposition party to pledge GPIF will move investments back into safer ones in its manifesto ahead of elections this month.

“Looks like the scrutiny on GPIF will continue,” Morgan Stanley MUFG’s Iwao said.

Stock routs

GPIF has been hurt after global stock routs in mid-2015 and early this year helped wipe about $7.4 trillion off world equities in the past 12 months. Japan’s Topix index has tumbled 19 per cent in 2016 to be the second-worst performing developed stock market as the yen strengthened, reducing returns from overseas holdings.

The fund’s assets under management probably fell to 133 trillion yen, Iwao estimates, from about 140 trillion yen at the end of December when it last reported results.

GPIF likely held about 43 per cent of its portfolio in domestic bonds at the end of June, higher than its target of 35 per cent for the asset, he said. Japanese stocks probably accounted for 22 per cent, while international equities made up 22 per cent, Iwao said. He estimates foreign debt stood at 14 per cent. GPIF’s target for equities is 25 per cent each, and 15 per cent for international bonds.

Post-election announcement

The pension fund is due to report results on July 29, about three weeks later than usual and after the upper house elections on July 10. Morgan Stanley’s calculations are based on the assumption that GPIF hasn’t rebalanced its portfolio, Iwao said.

Iwao’s estimates for the quarter are largely in line with calculations from SMBC Nikko Securities Inc. Hidenori Suezawa, a monetary and fiscal analyst at SMBC Nikko, forecasts a loss of 3.5 trillion yen to 4 trillion yen for the quarter. The deficit probably came from stocks and foreign debt holdings, while valuations for domestic bond holdings rose, he said.

“They can’t start buying domestic bonds, so there’s no turning back” said Suezawa. “They should keep buying risk assets when they fall, with a long-term view to gradually increase their assets again.”