For the first quarter of this year, Hong Kong's Mandatory Provident Fund has managed to incur losses of more than HK$105.7 billion or roughly around $13.6 billion. The performance of the investment fund, which includes the money of more than 3 million people under the city's retirement scheme, was the worst ever recorded since its July to September quarter in 2011.
The loss incurred by the fund roughly translates to about a HK$35,223 loss for each of its pension holders. This was a much steeper loss when compared to the losses recorded by the during the European sovereign-debt crisis. Much of the fund's 12.6 percent gains during the past four quarters last year were essentially wiped out over a single quarter. The MPF reported total assets of HK$969.46 billion at the end of 2019.
Pension consultants have pointed out that the ongoing coronavirus pandemic has pushed the global economy into a recession. The majority of the funds, including pension funds, have incurred massive losses due to the supply chain disruptions and the continued slump in economic activity.
Almost all of the 407 investments made by the MPF were in the red, having an average loss of 10.9 percent during the first quarter. Investors are expecting the losses to continue as the economic outlook seems bleak in the long-term, particularly if a vaccine or cure is not rolled out in the immediate future. In this scenario, investors are not expecting an immediate and strong market rebound.
For March alone, the MPF incurred a loss of around 7.3 percent, a significant jump from its 2.3 percent loss in February and its 1.9 percent loss in January. The only investments that were in the green were the investments made in bond funds, which were up by 0.8 percent in March with a total quarterly gain of 4.1 percent.
The general manager of employee benefits at Realife Insurance, Kenrick Chung, noted that the fund's performance for the quarter was not unexpected given the performance of other equity funds globally. He noted that only around 23 percent of the MPF's assets were in fixed-income funds, making it particularly susceptive to global economic shifts.
Among its international investments, the MPF's assets in Europe were the worst performers. The region had become the epicenter of the outbreak in March, resulting in the MPF's assets in Europe losing about 15.8 percent on average for the month. For the entire quarter, its stock funds in Europe lost around 24.8 percent.
In Asia, the MPF's stock funds, excluding those in Japan, dropped by 21.2 percent for the quarter. Stock funds in Hong Kong had dropped by 15.2 percent. Assets in the US lost around 19.1 percent, while mainland funds lost 12.2 percent.
