Retirement funds outshine HSI but challenges ahead

Returns of the 456 investment funds under the Mandatory Provident Fund grew 8.09 per cent last year, according to data provider Lipper.

Although that fell short of the retirement funds' 12.07 per cent returns in 2012, the performance was far better than the 2.6 per cent gain in the Hang Seng Index last year.

Under the MPF scheme, which covers 2.4 million people in Hong Kong, employees can choose how to allocate their part of the retirement contribution among different funds.

Those who chose funds focusing on Japan and US equities benefited the most last year. Japanese equity funds led with a return of 32.83 per cent, followed by pharmaceutical and health funds, at 31.62 per cent, and US equity funds, which returned an average of 30.13 per cent.

Bond funds had a bad year. The worst performers were Hong Kong dollar bond funds, which lost 3.42 per cent, followed by global bond funds, with a loss of 2.49 per cent.

South Korean equity funds also reported a 0.72 per cent loss.