(Adds more details) TOKYO, Nov 5 (Reuters) - Japan’s Government Pension Investment Fund (GPIF) posted a second-quarter investment return of 1.88 trillion yen ($16.54 billion), fuelled by gains from domestic stocks, it said on Friday. The world’s largest pension fund, GPIF managed 194.1 trillion yen of assets by the end of September, with a return on overall assets of 0.98% over the three-month period, it said in a statement. For the second quarter, Japan’s Nikkei stock average rose 2.3%, driven by progress in vaccinations to control the coronavirus pandemic. The fund’s Japanese stock portfolio achieved a return of 5.35%, while the foreign stock portfolio had a loss of 0.77%. GPIF’s investments are closely watched by global investors because of its sheer size. By the end of September, the fund had 26.79% of its portfolio in Japanese bonds, 24.17% in foreign bonds, 25.03% in domestic equities and 24.01% in foreign equities. The pension fund has been shifting its portfolio away from unprofitable domestic bonds toward higher-yielding foreign assets, as domestic interest rates are ultra-low. ($1 = 113.6500 yen) (Reporting by Makiko Yamazaki; Editing by Jacqueline Wong and Clarence Fernandez)