Hit by volatile global markets, the Mandatory Provident Fund posted only modest growth in the first half - and the outlook for the rest of the year is uncertain. The retirement plan, which covers 2.5 million local employees, eked out a return of 3.21 per cent in the first six months as the benchmark Hang Seng Index rose 5 per cent. But the MPF still did better than bank deposit returns, which are now close to zero. The 435 investment funds under the MPF lost an average 3.64 per cent in the second quarter, offsetting strong gains in the first quarter. The MPF gained 2.37 per cent in June, ending three consecutive months of losses during which the funds lost over 6 per cent. Mark Konyn, chief executive of Cathay Conning Asset Management, said the MPF's performance in the first half was hit by global macro risk factors, with improvement in the US at the start of the year boosting markets, while the euro-zone crisis in the last couple of months eroded them. 'The second half of the year is likely to be volatile and risk assets will continue to react to global macro factors,' Konyn said. 'Although Europe is dominating the headlines and appears to be driving sentiment, the key factor influencing sentiment will be the strength of the US economy. In an election year, this becomes more difficult to read.' Paul Chan, chief investment officer of Invesco Asia ex Japan, said the MPF returns were not bad, given the high market volatility. 'Investment markets will remain trading range bounded in the second half,' he said. 'We don't expect a breakout in the near term. The deal reached at the latest EU summit has given EU members more time to deal with the crisis. But, in the meantime, the need to deleverage, both for banks and the public sector, is pressing.' Mixed-asset funds, a blend of stocks and bonds that represent 42 per cent of MPF assets, gained 3.46 per cent in the first half, with a 3.43 per cent loss in the second quarter. Equity funds, the second most popular MPF vehicle and which account for 35 per cent of all fund assets, reported a 4.31 per cent return in the first half, with a loss of 5.92 per cent in the second quarter. Last month, both of the most popular MPF fund choices bounced back - mixed-asset funds had a return of 2.31 per cent and equity funds 3.59 per cent. Chan said workers should recognise the long-term nature of the MPF rather than focusing on the short term, and allocate the investments according to their risk profile.