Fear of inflation and a clearer roadmap for the U.S. Fed to hike interest rates led to a subdued first half for fixed income investments. In the MPF universe, six out of 17 Morningstar MPF categories recorded a loss. They are all conservative portfolios investing solely, or primarily, in bond assets.
Mixed Rally
During the period, the median return of 476 MPFs was 5.06%. Risk assets continue to perform well, as optimism over normalizing economic activities lasted through the past two quarters. The market expects Europe and selective areas in U.S. that are officially reopened for tourists to benefit laggard sectors such as offline consumption, and continues to double down on equities. Equity funds investing in developed markets, or those with global strategies, topped the MPF category list.
Another developed market, Japan has been catching up since November 2020, though the country continues to struggle to be rid of new COVID-19 infection cases. Meanwhile, the government says it will allow spectaculars at the Olympics Games, originally planned for summer 2020 but postponed to later this month. Japanese equity lost steam to concerns that have been piling up. Its first-half performance lagged other developed economies.
In June, the top-performing MPF funds are in line with the first-half ranking. Conversely, Asian ex-Japan and Hong Kong Equity are two categories that are catching up from the year to date, however, the category gave up some gains in June. MPF funds investing in these two regions made up the bottom 10 list.
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