End of month sell off wipes MPF member gains

3 March 2021

MPF’s most conservative members worst affected

MPF Ratings’ February MPF Performance Survey has now been uploaded.

Key points are as follows:

  • Total February MPF system earnings totalled $6.47bn. MPF total month-end assets are now at an estimated all-time high of $1.17tr.
  • The average monthly MPF fund return dropped from an intra-month peak of 4.10% (as at 19th of February) to only 0.47% (at end of February) due to a sharp sell-off in bond and equity markets, arising from rising US bond yields and inflation fears.
  • A monthly MPF return of 0.47% equates to an estimated average of $1,450 being added to members’ accounts in February, a decline of 88% from an intra-month peak of $12,500 (at 19th of February).
  • Despite the intra-month sell off, average month-end MPF member account balances grew for a 5th consecutive month and are now estimated at an all-time record of $262,177.
  • The MPF Ratings’ MPFR Bond Fund Index was the worst performing index in February, returning a loss of -1.60% (see table 1), the worst monthly return since June 2013, while all indices with a preponderance of bonds produced negative returns including MPF Ratings’ MPFR Default Investment Strategy Fund (Age 65 Plus Fund) Index which reported a loss of -1.21% (also see table 1).

When releasing MPF Ratings’ February MPF Performance Survey, Francis Chung, MPF Ratings’ Chairman stressed the need for MPF members to be vigilant in what is proving to be an unpredictable investment environment, cautioning, “Positively, the average account balance for MPF’s 4.5m member has now seen five consecutive months of growth and stands at an estimated record of $262,177, but we also saw average MPF member investment gains in February decline from an intra-month high of $12,500 to only $1,450. The magnitude and speed of this decline serve to highlight how sensitive markets are to negative news at present.”

Mr Chung also shared his concerns of a possible longer term market correction and the impact it would have on MPF accounts, stating, “The same volatility pattern has occurred every month this year. Strong monthly start to markets followed by sharp sell offs in the final week, and with concerns over rising US bond yields, inflationary and equity valuations, MPF members need to prepare themselves for the possibility of a market correction. When that will happen is open to speculation, but in such an environment, diversification and a long term investment focus is essential. With MPF account balances at record levels there is now more to lose than ever before especially for MPF’s most conservative members. They have just had their worst investment month since June 2013.”

Table 1: 1-month MPFR Index returns as at 28 February 2021

Source: MPF Ratings

Table 2: 10 best performing MPF constituent funds for February 2021

Source: MPF Ratings

Table 3: 10 worst performing MPF constituent funds for February 2021

Source: MPF Ratings

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