Top and Bottom MPFs in Apr 2023

Conservative portfolios stagnate. Developed markets equities stay on top.

Kate Lin 10 May, 2023 | 10:36
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Resilient economic data continued to support developed market equities, which outperformed Asia- and China-focused categories. This brought Mandatory Provident Funds, or MPF, an average loss of 0.64%. The year-to-date return slightly narrowed to 3.76%.

In April, equity categories were both the growth and loss drivers – developed markets went up while Asian markets fell. Fixed income funds led the leader board with an average of 0.25%, while money market funds, which returned 0.9%, came in second. Equity and allocation funds fell 1.74% and 0.12%, respectively.

Europe Continues to Lead

Gains from European equities were the most notable, both in the single-month and the year-to-date returns. The average Europe equity fund has returned 14.56% in 2023.

If you allocated to U.S. equity MPFs, the position earned 1.19% in April and just shy of 10% for the first four months in 2023. Global equity MPFs followed closely with a 1% and a 9% return for April and the year-to-date period, respectively.

Laggards were found in the equity category, too. China & Greater China equity performed the worst, losing 4.85% in April alone. Hong Kong equity MPFs came next with a 3.56% monthly loss. The single-digit declines erased their respective positive gains posted in the first quarter, making them the only categories in the red for 2023 so far.

Global Bonds Gain 3.7%

Among bond categories, global bond MPFs edged up by 0.27% in the month, which in total delivered a positive return of 3.7% since the beginning of 2023.

Following the failure of a handful of U.S. regional banks, capital flowed to quality. The drag in bond yields have largely dissipated in April, and bond markets also stabilized. Banking stress has persisted, exerting visible downward pressure on U.S. rate expectations.

In its latest rate-setting meeting in May, the Federal Reserve put its benchmark rate a quarter percentage points higher to between 5% and 5.25%. The level is at its highest in 16 years and is contrast to a near-zero level just 14 months ago. Higher interest rates have played a role in the recent failures of U.S. banks, but the Fed hinted at a more important message: May’s raise may be its last one for the intermediate future. The pace of rate hikes by the European Central Bank also slowed, as the central bank raised rates by a smaller amount than in previous months.

HKD bond funds returned 0.57% while Asia bond funds gained 0.39%. China bonds were little changed, falling 0.14% on average.

Best- and Worst-Performing Funds

Passively managed Hang Seng MPF-ST Plus-VC Euro Eq Tracker and its twin fund distributed by HSBC topped more than 400 other MPFs in April with a gain of 4.02%, staging a solid recovery from a 30% loss in 2022. The list of 10 best performers were filled by seven other European equity funds, with returns ranging from 1.93% to 3.64%.

The only fund that isn’t European equity is Manulife’s thematic strategy investing in global healthcare stocks. The fund, the only loss-making MPF in the first quarter, has recouped its losses and delivered investors a 1.16% return so far this year.

Turning to the laggards, the bottom 10 were all China & Greater China equity funds.

In China, economic indicators continue to show signs of expansion; some segments of the economy even grew at a faster rate than expected. However, appetite was sapped by U.S.-China geopolitical tensions. A key investment market for Greater China funds, Taiwanese equities were also a source of underperformance. A slowdown in global demand would translate into weaker export numbers in semiconductors among other main export items.

Down 6.65% in the past month, BEA (VS) Greater China Equity was the worst performer, returning negatively so far this year, too. The category’s sluggish performance broadly affected the popular categories among MPF contributors. All China funds were in the red in April while their year-to-date performances vary, ranging between negative 2.9% and positive 2.95%. The month was just as tough for Hong Kong equity MPFs, which generated an average return of 3.56%. The category’s worst performer, Invesco MPF HK And China Eq A, fell 5.12% in April, for example.

Past MPF commentary:

Q1 2023

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About Author

Kate Lin

Kate Lin  is an Editor for Morningstar Asia, and is based in Hong Kong

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