Investment funds in the Mandatory Provident Fund scheme, which covers 2.4 million employees in the city, continued its good run last month, beating the Hang Seng Index.
The funds reported an average return of 2.13 per cent while the Hang Seng Index rose 1.5 per cent for the month, data provider Lipper reports.
This followed a 4.18 per cent growth for the funds in September. The strong performance in the past two months helped the MPF to turn around 0.56 per cent in losses in the first half into a 6.83 per cent return for the first 10 months of the year.
The funds lag by a wide margin the 12.07 per cent gains registered last year but have substantially improved on the average loss of 8.42 per cent in 2011.
European equities funds were the strongest performers, with an average return of 4.71 per cent last month and a 23.15 per cent return in the first 10 months.
Japanese equity funds came off as the worst performers last month but they were the best performers in the first 10 months. They recorded a monthly loss of 0.33 per cent last month but have still returned 27 per cent for the 10 months because of their strong run earlier in the year.
Hong Kong equity funds rose 1.89 per cent last month, taking their 10-month gain to 4.27 per cent. The most popular, Hong Kong dollar mixed-asset funds, which invest in stocks and bonds, returned 2 per cent last month and 5.64 per cent in the first 10 months.
The Hong Kong Investment Funds Association chief executive, Sally Wong Chi-ming, said the investment markets had stabilised in the past two months, helping the MPF.
"However, we are still facing a lot of market uncertainties," Wong said. "The US has not yet announced when it will end the monetary easing policy while its debt ceiling problem is yet to be solved. MPF members should still take a cautious investment approach."
A survey of Convoy Financial released yesterday showed 49 per cent of employees who changed their MPF providers last year did so because of poor investment performance while 17 per cent switched because of poor services.
The survey was conducted over the past two months on 1,010 employees to get views on how the scheme has performed since the government, in November last year, allowed contributors to choose their own MPF providers rather than their employers picking the funds.
The survey showed 38 per cent of respondents have changed their MPF providers. Of those who did not, 27 per cent blamed a complicated switching procedure, 19 per cent said they were waiting for fee cuts while 15 per cent said they believed changing funds would have no impact on the performance of their investment.