The 2.54 million Hong Kong employees with government-mandated retirement accounts lost HK$5 for every HK$100 in their portfolios last month, data from Thomson Reuters' Lipper unit shows.
A rout in global equities last month saw the city's Mandatory Provident Fund book a negative return of 5.27 per cent from levels at the end of July - one of the worst single-month performances in three years.
The decline in the MPF compares with an 8.49 per cent drop in the Hang Seng Index over the same 30-day period. Mark Konyn, chief executive of RCM Asia-Pacific, called August 'one of the worst months since the financial crisis', resulting in 'dramatic negative performance for MPF investors'.
'Fears of a double-dip recession in the US and slower growth in Europe as a result of the euro-zone debt crisis caused many international investors to pull back from equities and seek the safety of US bonds and gold,' Konyn said.
The MPF, which covers 68 per cent of the local labour force, requires employers and employees each to pay 5 per cent of salaries, up to a maximum of HK$1,000 a month each, into schemes run by banks, insurance companies or fund companies.
The money is invested in different funds chosen by employees, but the scheme has come under criticism since its inception in December 2000 for offering limited investment options, high fees and failing to meet the financial needs of retirees.
The average MPF fund-expense ratio - fees and charges as a percentage of total fund size - was 1.82 per cent at the end of last month, according to data from the MPF Schemes Authority website.
There were 407 individual MPF funds at the end of the month. By category, the worst performing were the 166 equity funds, with an average loss of 8.81 per cent, according to Lipper data. Mixed asset funds, of which there are 140, shed 4.97 per cent of their value. The 42 money market funds were unchanged, while the best performing asset class were bond funds, which rose 0.97 per cent.
The net asset value of all MPF schemes was HK$384.48 billion at the end of June. The biggest share of that money was parked in mixed asset funds, which accounted for 42 per cent of total investments.
Equity funds accounted for 36 per cent, while so-called MPF conservative funds accounted for 11 per cent. Bond funds accounted for only 2 per cent of investments, with the remaining 9 per cent in guaranteed funds and money market funds.
In the year to date, Hongkongers' aggregated MPF portfolios have declined by 3.58 per cent on average, against a 10.72 per cent decline in the Hang Seng Index.
Going forward, worries over the macroeconomic outlook for the US and Europe mean trading on local and overseas stock markets is likely to remain volatile. But analysts said investors should see the bigger picture.
'The MPF is a long-term investment and hence a bad month should not be enough to make a change,' said Rex Auyeung Pak-kuen, Asia president of Principal Financial Group, an MPF provider. 'During a downpour, it is better to stay under cover than rushing across the street.'