MPF fund performance: Hong Kong’s worst quarter on record in Q3 2011

As of June 2011, Hong Kong’s MPF system held HK$384.5 billion in total assets, with the average member’s accrued benefits at HK$151,300. One quarter later, those retirement savings had shrunk dramatically — Lipper Hong Kong data showed MPF fund performance at negative 12.3% for the third quarter of 2011, the worst quarterly result since the system launched in 2000, and worse than the negative 11.6% recorded in the quarter when Lehman Brothers collapsed in 2008.

What caused MPF fund performance to collapse in Q3 2011?

MPF fund performance fell 12.3% on average in Q3 2011 as the European and US debt crises hammered global equities, with Hong Kong stocks plunging 21.5%. Based on assets as of June 2011, and excluding new contributions, the average contributor lost HK$18,535 in three months — roughly 18 months of the maximum monthly employee contribution.

Equity funds bore the brunt, Asian equities fell hardest

Measured monthly, MPF funds lost money for two consecutive months: down 5.27% on average in August 2011, then a further 7.8% in September. Equity funds were the worst hit, falling nearly 20% over the quarter and 12% in September alone, with Asian equity funds faring worst of all.

Japan equity funds, down just 2.2% in September, proved the most defensive of the equity group. Bond funds held their ground over the quarter with a 0.1% gain before turning negative in September, while money market funds eked out a 0.02% rise — a reminder that cash is king when markets slide.

Little hope of a fourth-quarter turnaround

The Lipper Hong Kong research director quoted at the time said the European and US debt crises had produced the worst MPF showing since the 2008 financial crisis, and doubted the fourth quarter would improve much. With average returns already down 10.7% over the first nine months of 2011, analysts saw little chance of a rebound while the Western economic outlook stayed murky.

MPF remains a long-term retirement investment, however. Members can compare charges and returns across funds via MPF fund comparison, or visit the retirement investment education hub to learn the basics of diversification.