MPF fund performance: bond funds beating equities fourfold this year, rotate into stocks on weakness

Last month’s MPF performance was flat: Lipper figures show MPF averaging nearly +0.2% for the month to end-July. Equity funds averaged just 0.24%, below bond funds’ 1.22% — bonds have outperformed equities all year.

How wide is the gap?

Bond funds are up 4.42% year to date versus 0.95% for equities. Among equities, Japan equity funds led, rebounding 2.71% after the earthquake; the big loser was European equity funds, plunging 4.12% on the euro-debt crisis.

What do experts say for the second half?

The consultancy’s managing director Ms Siu says bond funds benefited mainly from currency appreciation; but aggressive investors should not linger in bonds in H2 — with equities beaten down, rotate into promising markets. She sees euro-debt dogging European stocks (avoid), Japan’s problems as structural (avoid), but US stocks worth buying after their sharp correction on solid corporate earnings — hold 20–30% in US equities to balance, and diversify into China and Southeast Asia ex-Japan funds.

Any new funds worth watching?

This year’s new MPF launches are mainly index-tracking ETFs — cheaper fees, worth considering. For MPF returns that beat the pack, low-fee index funds are the pragmatic choice.

To compare bond and equity fund MPF returns, visit MPF fund comparison.