Performance of Exchange Fund 2008

The star fund manager Joseph Yam announced the return of the Exchange
Fund for 2008, -5.6%, the first time that is below the undisclosed
benchmark.

The following table appears on Mingpao:

Citi Government Bond Index +10.0%
Exchange Fund -5.6%
USD Balanced Equity and Bond Fund -26.0%
HSI -48.0%

Such table leads you to think that the Exchange Fund was doing pretty
well last year as it outperformed the balanced fund a lot, but it is
not!

If you look at the balance sheet of the Exchange Fund, 86%
of the assets are deposits or debt securities and less than 15% of the
assets are in equities so comparing the performance of it to balanced
fund is misleading.

Let's assume the benchmark for debt securities and deposits are 8% (I
added some discount to the 10% for the Citi government bond index
already), then the return on equity portion is:

(-5.6% - 86% * 8%) / 14% = -89%

Somehow, he must have bought some highly risky bonds or his equity
investment is completely crap.