CPFIS funds gain 20% in the second quarter

The best performing of the unit trusts under Singapore's Central Provident Fund Investment Scheme were those that invest in Indonesian and Indian shares.

Singapore's Central Provident Fund Investment Scheme (CPFIS) registered an average return of 20% in the second quarter of 2009, thanks in large part to equity portfolios, according to data provider Lipper.

CPFIS-included unit trusts gained an average of 21% in the second quarter, while CPFIS-included investment-linked insurance products (ILPs) gained an average of 19%.

The double-digit growth was not only recorded in the second quarter, but also for the first half of 2009. Both the unit trust and ILP portfolios ended the quarter and the first half in positive territory across all asset classes.

The best performing classifications were unit trusts invested in Indonesia equities and India equities, gaining 50% and 53%, respectively in the second quarter. These two categories posted an increase of 48% and 50%, respectively, for the first half of 2009.

"The return of investor appetite for risk and declining volatility were the main themes in the second quarter of 2009 due to recessionary fears giving way to incipient signs of improving conditions," Lipper notes. "Investors saw these signs or green shoots which made them believe the markets have temporarily bottomed out." Lipper says investors were buoyed by continued aggressive rate-cutting and stimulus measures globally, delayed positive effects of previously implemented measures, and economic indicators at more favourable levels than expected, especially in emerging markets such as China and India.

The MSCI World Index was up 15% in the second quarter, while the Singapore Straits Times Index gained 37% during the same period. Returns were relatively strong among emerging markets in general and in Asia particularly. Leading gainers among emerging markets were India (+49%), Russia (+49%), Indonesia (+41%) and Thailand (+38%).

"Current market expectations are for a recovery in late 2009 or early 2010," says Rajeev Baddepudi, Lipper senior research analyst of Asean. "While key issues concerning economic health persist -- high unemployment rates and a preference for savings over consumption -- it is encouraging that corporate earnings and GDP growth estimates for 2009 and 2010 are already being revised upwards -- a departure from the gloomy forecasts of only a few months ago."

Michael Lim, executive director of the Investment Management Association of Singapore (IMAS) says while fund managers are optimistic that the long-term scenario is positive, particularly in Asia, the short-term performance of the financial markets has been pleasantly unexpected.

"We continue to advocate that all investors adopt and practice the discipline of investing in long-term, diversified, and risk-adjusted portfolios to achieve all their investment goals," Lim says. "Without a long-term focus, we fear that some investors will continually be stuck in an unfortunate cycle of buying high and selling low."

The quarterly survey on the performance of the CPFIS funds was done by Lipper, IMAS and the Life Insurance Association of Singapore (LIAS).

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