The pension fund market's poor investment returns last year did not create panic among employees, according to Principal International (Asia). Principal is a leading pension provider in the United States and a Mandatory Provident Fund (MPF) provider in Hong Kong. Principal International (Asia) managing director Rex Auyeung said employees had taken a longer-term view on the investment of their pension money, so they kept their fund choice, even though returns had been poor. Less than 3 per cent of employees under Principal's MPF plan had asked to switch funds. The MPF launched on December 1, 2000, and covers 250,000 companies and two million employees. Employers choose an MPF plan provider while employees have a range of funds in which they can invest. The MPF's first year of operation was clouded by the global stock market slump, with more than 60 per cent of MPF options showing negative returns. However, Mr Auyeung said employees tended to stay calm. 'The MPF has obviously helped build a new investment culture in which Hong Kong investors are taking a longer-term view on their pension money,' he said. He believed Hong Kong employees would wait for two to three years to see how their funds performed before switching. Mr Auyeung said at Principal, 45 per cent of MPF contributions were being put into guaranteed funds, 20 per cent in money market funds, and 17 per cent in balanced funds, which invest in stocks and bonds. Capital preservation funds drew 8 per cent of contributions, stock funds 7 per cent and bond funds 3 per cent. These fund choices showed that Principal's clients were making more conservative investment choices, he said. 'When the stock markets worldwide are volatile, people opt for more conservative investment options,' Mr Auyeung said. He said market sentiment in the first half of the year would remain weak and better days would return in the second half. 'With the US and Hong Kong economies expected to recover mid-year, pension fund returns should also turn more positive,' Mr Auyeung said.