Hong Kong's Mandatory Provident Funds (MPF) achieved an average return of 6.23 percent in 2005, a decline from 2004's 8.76 percent, according to a recent analysis conducted by Standard & Poor's Fund Services.

The average annual return since the MPF scheme's inception in February 2001 is 15.01 percent, according to a press release from Standard & Poor's, one of the leading provider of fund research and analysis globally, on Tuesday.

Based on Standard & Poor's latest data for the months to Dec. 31, 2005, the average performance of equity funds included in the MPF is 13.75 percent, bringing the total gain to 22.154 percent since the scheme's inception.

Within the equity funds category, the best-performance sector is Equity Korea, posting an average return of 66.02 percent. Following close behind are Equity Japan and Equity Asia Pacific, with average returns of 32.10 percent and 31.75 percent respectively.

In the asset allocation category, which contains funds invested in equity, fixed income and money market securities, the average returns are 1.81 percent for the less volatile asset allocation global defensive sector and 6.08 percent for the more equity-oriented asset allocation global sector.

The fixed income sector, a longtime top performer along all MPF funds, suffered a minor setback in 2005, with an average negative return of 3.46 percent.

"As always, employees under the MPF Scheme should work with their financial advisers to determine an asset allocation that is most suitable for their needs, and review that on, at least, an annual basis," said Cynthia Case, Standard & Poor's Director for Fund Services.

Standard & Poor's Investment Policy Committee has a positive outlook on U.S. equities for 2006 and forecasts that the S&P 500 Index will rise to 1,360 by year-end 2006, representing an approximate 11 percent total return from 2005 levels.

"There are more reasons to feel optimistic about stock returns than not, including healthy GDP growth, tame inflation, and attractive valuations," said Case.

For 2006, S&P forecasts 6.1 percent GDP growth for the Asia-Pacific, given economic strength in China and the U.S. further. "Therefore, we believe the Asia-Pacific region offers growth at a reasonable price, and have a positive outlook for Asia-Pacific equities in 2006," said Lorraine Tan, vice president of Standard & Poor's Equity Research.

Source: Xinhua