15 May 2020
Fund flow data suggests Members switched at the wrong time.
April markets rebounded from a disastrous March to record some of the strongest monthly performance returns on record but a majority of MPF members not only failed to capitalize but actually locked in losses by switching funds at precisely the wrong time observed leading independent MPF research group MPF Ratings.
As equity markets rebounded and produced double digit returns (See Chart 1), MPF saw over 50% of net inflows in April move into Money Market and Guaranteed Funds, and surprisingly, all Mixed Asset fund categories experienced outflows (See Table 1), leading to Francis Chung, Chairman of MPF Ratings, to comment, “Regrettably it would seem that MPF investors failed to adhere to some very basic investing rules. Instead of buying when people are afraid and selling when people are greedy, the data suggests MPF members did the opposite, and to compound the problem, most of them switched out of Mixed Asset Funds,” before lamenting, “Of all the fund classes, Mixed Asset Funds, due to their diversified nature, offer MPF members the best form of long term protection and also returns.”
Chart 1: Monthly Returns of MPFR Indices for April 2020
Source: MPF Ratings
Table 1: Market Shares of MPF Assets and 1-Month Fund Flows as of 30 April 2020 (by Fund Types)
Source: MPF Ratings
When asked if he had any advice for MPF members during these times of uncertainty, Mr Chung was blunt in his counsel, “It takes courage to do nothing and remain invested over the long term, but regrettably, investors panic. To see over half of MPF inflows go into Conservative and Guaranteed Funds and to see good diversified investment options receive outflows as markets go up is counterintuitive and also disappointing for the MPF members who chose such actions.”
