CPF unit trusts, investment-linked products post negative returns in Q2

SINGAPORE : Units trusts and investment-linked insurance products under the Central Provident Fund Investment Scheme (CPFIS) posted negative returns in the second quarter, hit by volatile global markets. According to Standard & Poor's, appointed by the CPF to track the results, unit trusts averaged a negative return of 3.91 percent while investment-linked insurance products yielded a negative 3.79 percent return.

In numbers out on Tuesday, Standard and Poor's said only 16.5 percent of unit trusts and 13.8 percent of investment-linked insurance products under CPFIS posted positive returns. That is way below the more than 90 percent seen over a three year period. Over the past three years, 93.66 percent of all CPFIS-included unit trusts and 92.67 percent of investment-linked insurance products produced positive returns.

The weak showing was due to the sharp sell-off in global markets in the second quarter as investors fretted over the impact of high oil prices and rising interest rates on the global economy. Said V. Giri Mudeliar, executive director of Investment Management Association: "It was negative for the simple reason that the world markets were in a downturn and Singapore was not spared. As a result, the funds did badly. So I would not say this is doomsday. I would say this is one of those aberrations and investors should take it in their stride. "If the CPF funds do badly, they are not going to do badly quarter-on-quarter or yearly-on-yearly. You'll find that they will pick up."

There are nearly 300 funds for CPF account holders to choose from.

Over a 12-month period, 70 percent of them outperformed the CPF ordinary account rate of 2.5 percent. But there were some that got dragged down by profit-taking. "During the second quarter, the funds that actually delivered negative returns were funds or sectors that had experienced substantial outperformance in the past year and the past three years. And you would see that these funds would fall into the equity-India, equity-China as well as equity-Japan categories," said Cynthia Case, director of Fund Services at Standard & Poor's.

"Funds that posted positive returns in the second quarter were the fixed-income variety. And again, that really just mimic what's going on in the overall global markets, where there's been a bit of a flight into quality during turbulent times," she explained.

Still, experts said after the recent sharp correction, outlook for Singapore stocks, especially blue chips, is brightening. "I think the Singapore market is in a decent position because the underlying economy is healthy. There is income coming in on the oil & gas side. Obviously if the US slows a little bit, it may chafe us a little. But on the whole, we think there is decent domestic consumption growth here, and we've also got the two IR (integrated resort) projects coming onboard," said Lorraine Tan, director of research (Asia) at Standard & Poor's.

The moving 12-month average return from CPF unit trusts is still at a positive 9.48 percent, while investment-linked products are a positive 7.82 percent.

- CNA /ls