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FUNDS invested under the Central Provident Fund Investment Scheme (CPFIS) have recovered along with the rising equity tide in the second quarter.
In the second quarter, CPFIS funds enjoyed a 20 per cent gain on their portfolios, according to data from Lipper, the research arm of Thomson Reuters.
The growth was mainly fuelled by equity funds, which put on a 26 per cent return on average. Unit trusts enjoyed a 21 per cent growth and investment-linked products (ILPs) grew 19 per cent.
But those who invested as early as last year may still be sitting on losses. For the one-year period to June 2009, all CPFIS funds still closed in negative territory due to the severity of the equity slump in the second half of last year. Investors who bought into these funds in June last year would be nursing a 15 per cent loss on their investments.
Those who started ploughing into CPFIS only this year would count themselves lucky. Led by the global rebound in equities this year, all CPFIS funds closed 18 per cent higher on average in the first six months, with unit trusts marking a 19 per cent growth and ILPs growing by 17 per cent.
A return of investor appetite for risk and declining volatility were the main themes for the second quarter as recessionary fears faded in the face of 'green shoots' in the economy, the Lipper report says.
Returns were strong among emerging markets, particularly Asian funds. The best-performing classifications for unit trusts were Equity Indonesia and Equity India, which posted returns hovering around 50 per cent in Q2 and H1. Equity Singapore also posted strong returns of 40.93 per cent in Q2 and 34.55 per cent in H1, in line with broad gains on the local bourse.
For the first time in four quarters, more than 25,000 Singapore-registered funds saw net inflows of $513.3 million in the second quarter, based on estimates from Investment Management Association of Singapore (IMAS).
Rajeev Baddepudi, Lipper senior research analyst of Asean, noted that the current market expectations are for a recovery in late 2009 or early 2010.
'The outlook is pretty positive at the moment. We've seen a couple of European countries coming out of recession, GDP growth forecasts turning positive and unemployment rates coming down,' Mr Baddepudi told reporters at a briefing yesterday.
'These are initial signs of recovery gaining traction,' he added. 'We are optimistic for the next two to three months.'
Mr Baddepudi noted that CPF products have outperformed non-CPF funds in Q2. He sees potential for outperformance in equity and mixed-asset funds in Asia, be they single country-focused or pan-regional funds, but expects demand for bond funds to shrink and result in more outflows.
But the new restrictions on CPF investments that took effect in April last year may have kept some investors out of the game.
Since April last year, only monies in excess of $20,000 in the Ordinary Account (OA) and $20,000 in the Special Account (SA) can be invested under CPFIS. The threshold of SA was raised to $30,000 from May this year.
Fundsupermart general manager Wong Sui Jau told BT that investors who took profit from their CPF investments in Q2 could be held back from new investments because of the thresholds they need to maintain in their CPF accounts.
According to Lipper, the net outflows from the 346 CPFIS funds have risen to $20 million in Q2 from $5 million in Q1.
While CPFIS inflows of $53 million was higher than the $33 million seen in Q1, outflows in Q2 ($73 million) far outpaced that ($38 million) in Q1.
Pauline Lim, executive director of the Life Insurance Association, said data on purchases of ILPs 'does show an impact'.
The fragile market sentiment has also been a major factor for continued net outflows from CPFIS funds, added Michael Lim, executive director of IMAS.
Notwithstanding short-term market volatility, Mr Lim advised that investors continue to practise the discipline of investing in long-term, diversified, and risk-adjusted portfolios.
'Without a long-term focus, we fear that some investors will continually be stuck in an unfortunate cycle of buying high and selling low,' he said.
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