Top MPF Gainers and Losers in August 2023

Less risky categories, such as money market funds and bond funds, gained, as did a healthcare equity strategy.

Kate Lin 11 September, 2023 | 12:26
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In August this year, MPF funds lost 2.8% on average. Equity funds fell 4.9% on average, followed by an average 2.4% loss for allocation funds. Fixed income funds were also in the red, falling 0.7% on average. So far this year, the scheme’s funds have generated a 3.2% return for contributors.

With economic indicators still robust, policymakers in the U.S. seemed divided on the next rate decision. In August, value stocks returns were flat, with any gains were more than cancelled out by the loss from growth-tilted stocks, which have lost ground after June. For the month, U.S. equity MPFs slid 1.4%. Despite negative returns, U.S. equity MPFs still outperformed all other equity groups as Japan equity and global equity MPFs fell 1.9% and 2.1%, respectively.

Looking closer to home, Japanese stocks had a flat return for August, even as sentiment remained mixed due to a continued upward revision in corporate earnings, persistent Japanese yen weakness, as well as rising tension with China following the discharge of nuclear wastewater.

Locally, popular Hong Kong and China & Greater China equity funds remained the monthly and year-to-date laggards, losing 7.9% and 6.9% for the month respectively. Teetering on the brink of a bear market, the Hang Seng Index has given up 19% of the returns as of Aug. 31 from peak touched in Jan. 27.

Only Two Categories Return Positively

Hong Kong dollar-denominated bond funds gained 0.2%. Except that, all other bond categories, including China, global, and Asia bond funds, posted a negative return.

Another of only two categories in the green is HKD money market funds, which returned 0.3% for August.

The Default Investment Strategy – core accumulation funds, a preset allocation strategy for MPF contributors before the age of 55, lost 1.3% on average.

Manulife’s Sector Equity Fund Tops 482 MPFs

The top returning fund for the month was the Manulife GS MPF Healthcare fund, that posted a 1.8% return for August. So far this year, the fund returned 2.7%. The remaining funds in the top 10 are either HKD money market or bond funds. They gave out returns of between 0.38% and 0.52%.

On the other end of the scale, two share classes of Invesco MPF HK And China Eq lost 9.4% in August. These two strategies declined close to 11% so far this year, which made them year to date laggards among over 480 MPF classes as well. The bottom 10 for the month was completed by seven other Hong Kong equity funds and one China & greater China equity fund, BOC-Pru Easy Choice Ch Eq HKD.

U.S. Funds Performed Well Over the Long-Tem

Allocation funds performed the best so far, with a 4.2% average return. Equity funds ranked second as they averaged a 3.3% return.

Zeroing in on the Morningstar category level, U.S. equity funds were the leader, averaging a return of 19.2%. The group was followed by Japan equity (16.4%), global equity (14.0%), and Europe equity (12%). DIS – core accumulation fund, which invests both stock and bond securities, ranked fifth, posting a return of 9.4% for the period.

For the longer term, equity funds generated an average return of 3.5% each year in the past 10 and 15 years. By Morningstar category, U.S. and global equity funds performed the best. Global bond funds were the laggard, recording a negative 0.9% return each year in the past 10 years.

New Funds Investing in U.S. and Europe

Two new funds are added to the scheme, Fidelity Retirement Master Trust - Americas Equity Fund and European Equity Fund. The addition brought Fidelity’s total number of MPF constituent funds to 24.

Charlotte Chan, head of workplace and personal investing, Hong Kong at Fidelity International sees home bias in MPF portfolios a risk and a hindrance to investment performance potential.

Chan believes with the new funds on the Fidelity MPF platform, it will provide MPF investors with “the opportunity to explore beyond Hong Kong to manage concentration risk and achieve better returns for a successful retirement.” Fidelity’s analysis suggests that the correlation of the Hong Kong market with U.S. or European markets is relatively low, when compared to Asia Pacific markets, for example.

Morningstar’s study in investor portfolios found that, despite an access to many financial products and the ease of trading, Hong Kong investors exhibit a heavy home bias. This proved to be costly in the most recent round of market downturn in Hong Kong and China equities.

Bryan Cheung, associate director for manager research team at Morningstar, reminds investors allocating for MPF and a broader portfolio and says: “A robust portfolio is not just about diversifying away your home bias, but it’s also about striking a balance across different asset classes, sectors, style, and also individual holdings, given that it is appropriate for investors' risk and return expectations and to make sure that a choppy market won't keep your clients awake at night.”


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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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