Funds under the Central Provident Fund Investment Scheme (CPFIS) rebounded from a tough third quarter last year, posting returns of 3.01 per cent on average in the fourth quarter over the previous three months.
It was the first gain in value after two straight quarters of losses, said fund research firm Thomson Reuters Lipper yesterday.
Lipper monitors the performance of unit trusts and investment-linked insurance products (ILPs) under the CPFIS.
However, different asset types perform differently in several situations, said Lipper's head of Asia-Pacific research, Mr Xav Feng.
"Equities follow the global stock markets, while bonds are more stable, outperforming in most quarters in 2015. We are looking at the simple average here," he added.
The CPFIS was set up to provide CPF members with more investment options that are subject to market risk. In contrast, the CPF Ordinary Account pays a return of 2.5 per cent while the CPF Special Account pays 4 per cent - these returns are guaranteed.
Markets staged a recovery, helping CPFIS-included unit trusts increase 3.27 per cent on average from October to December, while CPFIS-included ILPs rose 2.84 per cent. Equity-linked CPFIS-included funds posted a fourth-quarter gain of 3.87 per cent. Mixed asset-linked products, which invest in both equities and fixed-income securities, were up 2.37 per cent, while bond-linked CPFIS-included funds inched up 0.3 per cent.
These were in line with benchmark equity index MSCI AC Asia ex-Japan Index, which was up 3.64 per cent, while they did better than the Citigroup World Government Bond Index, which slid 1.45 per cent.
However, investors who held these funds for the 12 months to Dec 31, 2015, experienced lacklustre results. Equity funds returned a gain of only 0.71 per cent on average for the year, while bond funds were more stable, climbing 1.74 per cent. Mixed asset-linked products inched up 0.04 per cent on average during this period.
On the other hand, investors who were invested for a three-year period to the end of 2015 did better. CPFIS-included funds had a strong performance, with returns of 20.07 per cent on average.
CPFIS-included unit trusts gained 23.18 per cent on average, while CPFIS-included ILPs were up 18.19 per cent.
Mr Feng said the top equity sectors over this three-year period included biotechnology, healthcare and information technology.
"According to our analysis, biotech and healthcare are not highly correlated to the global economic cycle," he added.
Mr Feng said this year will be challenging as "global financial markets are increasingly driven by headlines, with markets swinging dramatically on the back of central bank announcements".
"Low oil prices are expected in the coming months due to persistently high supply. Weak Purchasing Managers' Index data out of China is disquieting, as is the dislocation between markets and the US Federal Reserve's interest rate hike schedule."
Mr Feng added investors should remain cautious with their pension funds and not just focus on equity-type funds and ignore the risks.
However, he added that the market volatility could present new opportunities for the careful investor.