MPF fund performance: as of September 2011, equities bled while bonds stayed green

The euro-debt crisis swept global markets in 2011 and MPF’s report card was grim. As of 30 September 2011, only three fund categories posted positive year-to-date returns — Hong Kong-dollar bond funds (+5.09%), global bond funds (+2.82%) and conservative funds (+0.07%); every equity fund was in negative territory.

Why were bond funds 2011’s only winners?

As of 30 September 2011, MPF fund performance split to extremes: bond funds were the only positive category, with Hong Kong-dollar bond funds up 5.09% year-to-date and global bond funds up 2.82%; over the same period Greater China equity funds plunged 25.96% and Hong Kong equity funds fell 24.14%, with no equity fund spared. Safe-haven flows into bonds lifted bond prices — which is why bond funds stood alone in a crash year.

The balanced-fund lesson: the more equity, the deeper the fall

Balanced-fund data best illustrates diversification’s value: funds with 20%–40% equity returned -4.17%; 40%–60% returned -8.45%; 60%–80% returned -12.74%; and 80%–100% hit -18.01%. The higher the bond content, the bigger the cushion in a falling market. As for guaranteed funds, the “guarantee” is conditional — returns still printed -0.72%, though far smaller than equity funds’ losses.

美聯’s 張伯倫: it comes down to risk tolerance and switching timing

With analysts warning of one “final” plunge, should members buy equities cheap or add bonds? 美聯 Financial Group senior vice president 張伯倫 said it hinges on personal investment risk tolerance and the timing of fund switches — there is no one-size-fits-all answer, only the answer that fits you. The MPF education hub explains each fund category’s role in volatile markets.