mpf returns fees vary substantially study

The survey, conducted by the Hong Kong Consumer Council of some 523 funds in total, found that the five-year returns of 159 of a group of 341 "comparable" funds – or 45% – were “in the red”.

The range between the best and and poorest-performing equity funds over five years was found to be as high as 20 percentage points, with the best producing a return rate of 5.67% and the worst-performing a rate of -14.04%.

The survey also found that fees charged by the various  fund entities vary "susbstantially" from one to another, even among similar types of funds. In general, the fund expense ratio of the MPF funds – which, it is noted, reflected the total expenses of those funds – ranges between 4.62% at the upper end to 0.17% at the low end, "a 26-time difference".

The research was carried out between July and September of this year.

“”Making an informed choice chan make a real difference to employees’  accrued benefits,” the Consumer Council noted, in a summary of its findings posted on its website.

Employees, it added, should "not rush to change" MPF providers, but should "carefully consider their risk tolerance level and investment goal before making a transfer".

As reported, employees in Hong Kong, all of whom participate in the Special Administrative Region’s Mandatory Provident Fund scheme, next month will begin to be allowed to choose which MPF provider they use.

This introduction of so-called Employee Choice Accounts is said to be eagerly anticipated by many Hong Kong advisers, who are looking forward to being included in the decision-making process.

Hong Kong employees currently contribute 5% of their salary, capped at HK$1,000 ($130) a month, to an MPF retirement account. This is matched by employers, who, for now, also choose the MPF provider.

In introducing Employee Choice Accounts, the Hong Kong Government is understood to be hoping to put pressure on the MPF providers to improve their performance and reduce fees.

Best and worst performers: SCMP

In its coverage of the Consumer Council research, Hong Kong’s South China Morning Post included a table showing the three best- and worst-performing MPF funds. (See below.)

Manulife funds occupied the top and bottom places, respectively. All three of the funds with the poorest performance over the past five years were Japan equity funds.

To read the South China Morning Post story,click here.