By Jamie Lee

FUNDS registered under the Central Provident Fund investment scheme (CPFIS) suffered an overall loss in the second quarter of this year, reversing from slight gains in Q1, as uncertainty over the eurozone debt crisis and the US economy took hold.

The overall performance of the 334 funds - 156 unit trusts and 178 investment-linked insurance products - licensed to tap CPF savings fell 6.55 per cent on average in the three months ended June, data from fund research firm Lipper shows.

Their performance was mainly dragged down by losses sustained by funds linked to global equities.

By comparison, in Q1 the funds posted a marginal overall gain of 1.53 per cent, with unit trusts gaining 1.9 per cent on average and investment-linked insurance products (ILPs) gaining 1.19 per cent on average.

But unit trusts posted an average loss of 7.27 per cent in Q2. Of these mutual funds, those linked to equities posted the biggest loss, higher than those linked to mixed assets - a mix of equities and fixed-income securities - and bonds.

Equity-linked trusts lost 8.63 per cent on average, while mixed-asset funds were down 5.09 per cent on average.

Funds linked to bonds posted a modest overall gain of 0.9 per cent.

Despite the poor showing by equity-linked unit trusts overall, CPFIS mutual funds linked to equities in Thailand, Malaysia and India took the first three spots among the top-performing asset classes in the first half of the year.

Unit trusts linked to Thailand shrugged off the political crisis there in May to post a 9.63 per cent return.

Insurance-linked products (ILPs) lost 5.89 per cent broadly in Q2. Those linked to equities posted an average loss of 8.23 per cent, while those exposed to mixed assets had a negative average return of 4.2 per cent.

ILPs linked to bonds fared best, gaining 1.42 per cent in Q2, while those linked to the money market - which refers to fixed-income markets with an average residual life to maturity of under a year - returned just 0.08 per cent.

For the first half of 2010, CPFIS funds linked to bonds were the clear winners, posting an average gain of about 2 per cent.

Funds tied to the money market followed with an overall gain of less than one per cent.

In the six months ended June, equity-linked funds posted a loss of about 8 per cent, while mixed asset-linked funds saw a negative return of about 6 per cent in the same period.

Some 3,000 Singapore-based funds posted a 6 per cent drop in total net assets in the first half, taking the fund size tally to just over $4 billion, data from Lipper for Investment Management shows.

This article was first published in The Business Times.