The Mandatory Provident Fund, which covers the city's 2.5 million employees, sank back into the red last month as Japanese and emerging-market stocks fell.
The 458 investment funds under the retirement scheme reported an average month-on-month loss of 0.87 per cent after a gain of 1.9 per cent in April, according to data provider Lipper.
For the first five months of the year, the MPF recorded an average gain of 2.74 per cent, far short of the 12.07 per cent growth seen in the same period last year.
Almost all categories of funds suffered losses last month. The exceptions were stock funds investing in the United States and Europe, and the most conservative fund types that put their money in bank deposits.
Japanese equity funds, the best performers in the first four months, performed the worst last month with an average loss of 5.89 per cent. This came as the Nikkei-225 Index fell 15 per cent after gaining 33 per cent in the first four months.
For the five months to May, however, Japanese equity funds still returned 16.42 per cent, making them the top performers for the period.
Greater China equity funds returned 0.18 per cent last month and 2.44 per cent in the first five months.
US equity funds were the best performer, returning 2.56 per cent on the month and 14.22 per cent in the year to date.
European equity funds showed gains of 2.01 per cent and 9.53 per cent, respectively.
Hong Kong equity funds declined 0.48 per cent on the month and 0.01 per cent in the year so far.
The popular mixed-asset funds, which invest in both stocks and bonds, on average lost 1.04 per cent last month but grew 3.87 per cent in the five months.
Cathay Conning Asset Management chief executive Mark Konyn said "there is a general sell-down globally of higher-yielding and riskier investments" that resulted in the MPF suffering a slight loss.
Funds investing in the US and European stock markets held up as they reaped the benefits of diversification, he said.
Looking ahead, Konyn said US funds flowing into the Hong Kong stock market would support the market.
"Higher-yielding investments will likely continue to prove volatile as a result of speculation that the end of the US monetary stimulus will begin sooner rather than later," he said.
Rex Auyeung Pak-kuen, the Asia president of Principal Financial Group, said the outlook remained unclear.
"The US market is showing more solid performance due to respectable corporate results. However, emerging markets are an unknown," Auyeung said. "While the road ahead could be bumpy, I would take a cautiously positive view for the second half of the year."