CPF Investment Scheme-included funds slip in Q1; caution advised

THE overall performance of unit trusts and investment-linked insurance products (ILPs) included under the Central Provident Fund Investment Scheme (CPFIS) posted negative returns in the first quarter of this year amid market volatility, prompting an expert to urge caution.

Data from Thomson Reuters Lipper showed on Thursday that the overall performance of CPFIS-included funds in Q1 posted negative returns of 3.26 per cent on average. CPFIS-included unit trusts fell by 3.8 per cent, while CPFIS-included ILPs slipped 2.9 per cent.

For all CPFIS-included funds, equities and mixed-asset posted negative returns of 5.02 per cent and 1.89 per cent respectively. Bonds and money market funds posted positive returns of 2.53 per cent and 0.22 per cent respectively.

During the three months ended March 31, 2016, the benchmark MSCI AC Asia ex-Japan index slid 3.36 per cent.

For the 12-month ended March 31, 2016, basis, the performance was also weak. The overall performance of CPFIS-included funds fell 7.98 per cent on average. CPFIS-included unit trusts slid 8.45 per cent on the year and CPFIS-included ILPs fell 7.72 per cent on average.

During the period, the MSCI AC Asia ex-Japan Index slid 13.21 per cent. In contrast, bond offerings (+2.84 per cent on average) outperformed equities (-11.61 per cent on average), mixed-asset (-5.59 per cent on average) and money market funds (+0.74 per cent on average).

Xav Feng, head of Asia Pacific Research at Thomson Reuters Lipper, said 2016 kicked off with a volatile start, with risk markets experiencing sharp drawdowns to mid-February, followed by a strong rally.

"Market expectations of US Federal Reserve's monetary policy have become more sensitive due to speculation over faltering global growth and mixed US economic data," Mr Feng said.

He added that China's growth slowdown continues to impact global financial markets, as evidenced in falling imports and exports.

"Seesawing commodity prices, Bank of Japan's negative interest monetary policy and whether European Central Bank's quantitative easing has reached its limit of effectiveness all contribute to an uncertain economic outlook. In light of continued market volatility, investors are advised to remain cautious but opportunities may arise," Mr Feng said.

Lipper has been appointed by the Investment Management Association of Singapore and the Life Insurance Association of Singapore to monitor the performance of all unit trusts and ILPs included under CPFIS.