OVERSEA funds investing in China's yuan-denominated shares posted a 13.47 percent decline in average return last month due to a sluggish stock market jolted by a liquidity crunch and economic slowdown, according to an industry report.

Performance of funds managed under the Qualified Foreign Institutional Investor program, a main gateway for foreign investors to tap China's securities market, reported bigger declines than the 10.51 percent decrease posted by domestic equity funds, said research firm Lipper & Co, a subsidiary of Thomson Reuters.

In the first six months of the year, the average return of QFII fund dropped 11.86 percent, underperforming that of domestic peers, which fell 0.05 percent following a 12.78 percent slump in the Shanghai Composite Index.

The average return of funds under the Qualified Domestic Institutional Investor scheme, which allows domestic firms to invest in overseas markets, declined 5.39 percent in June and 5.15 percent in the first half of the year.