Bond funds become MPF’s safe haven, shielding investors from losses as trade war escalates
- Bond funds were the only category of funds in Hong Kong’s compulsory savings scheme to have avoided losses in May, according to data from Lipper
- Analysts say bond funds are less directly affected by the trade war than the more popular stock and mixed-asset funds
Bond funds have become a safe haven for the Mandatory Provident Fund, the only category of investment to deliver a recent gain as the trade war between the US and China escalated, according to pension experts.
The 33 bond funds in Hong Kong’s compulsory retirement savings scheme saw an average gain of between 0.17 to 1.1 per cent in May, the best performers among the 426 MPF investment funds tracked by Lipper, part of data provider Refinitiv.
The bond funds beat the overall MPF investment fund, which on average reported a loss of 4.02 per cent last month, the worst monthly return since October when it dropped 5.64 per cent.
“Global MPF bond funds were less affected by investment market sentiment in May as the majority holdings of these funds are investing in government bonds in various regions or countries, that are less directly impacted [by the trade war],” said Elvin Yu, chief executive of pension consultancy firm Goji Consulting.
“For MPF members who are worried about short-term volatility, or those who are closer to their retirement, it would not be a bad idea for them to consider bond funds as a way to reduce their risk level in their MPF investment as the trade war is likely to last for some time.”