Funds under the Central Provident Fund Investment Scheme (CPFIS) fell by 1.53 per cent in the second quarter, ending what had been seven consecutive quarters of growth.
Researcher Lipper, which monitors the performance of all CPFIS funds, said unit trusts in the scheme recorded a loss of 1.22 per cent while investment-linked insurance products (ILPs) fell 1.71 per cent in the three months to June 30.
Except for money market products, funds in the rest of the asset types posted negative returns. Equities fell 1.41 per cent, bonds were down 1.23 per cent and mixed assets retreated 2.08 per cent.
The overall performance was consistent with the trend in global markets during the same period. The key benchmark equity index MSCI World TR USD fell 1.36 per cent, the MSCI AC Asia ex-Japan Index decreased 1.2 per cent, while the Citigroup World Government Bond Index slid 3.36 per cent.
The overall performance of CPFIS-included funds was better in the one- and three-year periods to June 30. CPFIS-included funds rose 6.5 per cent on average over that year and 31.36 per cent over the three-year timespan.
Globally, about US$197.45 billion (S$277 billion) flowed out of Asia ex-Japan markets, while inflows were seen in the US (US$91.06 billion), Europe (US$66.54 billion) and Japan (US$52.6 billion) markets in the first half of this year.
During the same period, about US$81.26 billion flowed out from funds across asset classes, while mixed asset funds saw the highest net inflow of about US$189.3 billion.
Lipper's head of Asia Pacific Research, Mr Xav Feng, expects larger outflows in the coming months and bigger market fluctuations.
He cautions retail investors to be "more conservative" as he expects the market instability to continue for another quarter.
Mr Feng said: "With improved economic and employment figures, the US Federal Reserve is expected to raise interest rates for the first time in nearly a decade. Global investors should continue to pay attention to the volatile market, especially the timing of the possible monetary policy move by the US Fed, and the impact of the recent devaluation of the Chinese yuan."
Under the CPFIS scheme, the CPF Board allows CPF members to invest their savings in bonds, stocks, unit trusts, exchange-traded funds, property funds and ILPs, while meeting the long-term objective of securing financial security in old age. Approved funds fall under two categories.
There were 287 CPF-approved funds as at June 30 - 107 unit trusts and 180 ILPs. These are expected to be well-diversified funds with low investment costs, good performance records and robust processes.
Lipper, which rates CPFIS-included funds based on absolute returns, total returns, expenses and capital protection, had three ILPs and one unit trust in the top 20 per cent of funds across all four metrics as at the end of June.
The ILPs are NTUC Global Managed Fund (Growth), NTUC Global Managed Fund (Balanced) and NTUC Global Managed Fund (Conservative), while the unit trust is APS Alpha Fund A SGD.