AIA lowers MPF fees

八月 19, 2011
Joe Chan

Move may trigger new round of cuts

AIA announced on Wednesday that it will slash the management fees for mandatory provident funds (MPF), a move some analysts say could trigger a new round of fee cuts, benefiting MPF members.

In a move to lure customers, the Asia-focused insurer will introduce a series of low-fee funds, including a bond fund and three equity funds, with management fees of up to 0.99 percent per annum of their net asset value (NAV) at the constituent fund level.

Meanwhile, the management fees of Global Bond Fund, MPF Conservative Fund and World Equity Fund under the existing MPF schemes will also be reduced to the same level.

Mathew Kwok, China division vice-president at Taifook Securities Ltd, said he expected that other MPF service providers will follow suit and cut fees.

"The level of fees of MPF schemes in Hong Kong is quite high," Kwok said. "Now that AIA has taken the lead in lowering its management fees, I expect to see many others do the same thing."

For the 165 equity funds under the MPF schemes, the average fund expense ratio (FER) currently stands at 1.91 percent. For the 212 mixed assets MPF funds, the average FER is 2 percent.

Management fees vary with different funds and insurers. Take AIA for example, its equity funds other than the aforementioned low-cost ones, such as Greater China Equity Fund and Hong Kong Equity Fund, charge a management fee of 1.75 percent of NAV per annum at constituent fund level.

Hong Kong Equity Fund of Manulife, another insurer, carries a management fee of 1.9 percent of NAV per annum. Management fees at ING’s MPF Comprehensive Scheme Hong Kong Equity Portfolio are 2.08-2.135 percent of NAV per annum.

"After adding the four new low-fee constituent funds, our MPF platform will contain a total of 25 constituent funds designed to suit a range of different needs," Bonnie Tse, senior vice president and managing director of AIA Pension and Trustee Co Ltd, said at a media briefing Wednesday.

Kwok of Taifook Securities Ltd said that he believed that the launch of the low-fee funds will help AIA gain customers.

Patrick Yiu, associate director of asset management at CASH Asset Management Limited, said that lower management fees wouldn’t guarantee more customers, however. What matters, he noted, is the performance of the individual funds.

"People choose funds not by the management fees the funds charge but by the past performance of the funds," said Yiu. The performance, or the rate of return, according to Yiu, depends on how wisely the assets are allocated.

Fund tracker Lipper’s data shows that the average rate of return of all MPF funds through the first seven months of this year was 1.58 percent. For July, the average rate of return was 0.18 percent, following a negative 1.54 percent in June.

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