A 4.62% expense ratio: Hong Kong’s priciest target-date MPF fund

This article is a rewrite of a report from May 2012.

Twelve years into the MPF system, overall fees have fallen 17 per cent in four years — yet some funds remain strikingly expensive. According to MPFA data covering all 525 MPF funds, the AMTD Invesco Target 2048 Retirement Fund carries an average expense ratio of 4.62 per cent, the highest of its kind. It even levies a rare joining fee of up to HK$8,000, borne by employers, preserved-account holders and the self-employed.

What is a target-date fund?

A target-date fund — the “lazy fund” — automatically adjusts its equity-bond mix as the contributor approaches retirement. The younger the saver, the more equities it holds; as retirement nears, it shifts towards lower-risk bonds, sparing members from rebalancing themselves. Convenience aside, charges vary enormously, so the expense ratio deserves a close look before choosing one.

How wide is the fee gap?

The AMTD fund costs 24.67 times its peer. AMTD responded that the expense ratio reflects total expenses as a share of assets, so both the fee level and the asset base move the number; with only HK$3.76 million in assets, the ratio is pushed higher. Small scale plus high charges is the story behind the 4.62 per cent.