Investors in Hong Kong's Mandatory Provident Fund are still making contributions to a pension fund system that has yet to bear fruit, with the average MPF fund down 15.4 per cent since the scheme was launched in February 2001, according to Standard & Poor's Fund Services.
The overall negative number was mainly due to the poor performance of equity and asset allocation funds. Fixed income funds have risen 9.18 per cent since inception, while money market funds have gained 2.34 per cent.
For the quarter to the end of March, the average MPF fund lost 2.58 per cent. Fixed income funds were the best performers, bringing in an average gain of 0.94 per cent with money market funds returning 0.04 per cent. Equity funds lost an average 5.98 per cent for the quarter.
S&P's Investment Services managing director for Asia-Pacific William Reidy said: 'The three consecutive years of bearish market conditions have made it an exceedingly difficult period for equity and equity-related funds like asset allocation funds. The situation is compounded by the recent geopolitical uncertainty caused by the war in Iraq and threat of nuclear weaponry in North Korea.'
Mercer Investment Consulting's Doris Ho said investors needed to give a bit more time to the performance of the MPF. 'Historically it is quite rare to have three years of negative returns in a row,' she said.
Mr Reidy said MPF scheme members had to remember they had a long investment horizon for their pension plans and there were bound to be periods when one asset class substantially outperformed another. He recommended investors work with their investment advisers to decide on the best way to allocate their assets, with regular reviews to ensure the funds they had chosen were not underperforming the market.
Ms Ho said investors should first evaluate their funds against their benchmark index and only then against their peer group.