Asia equity funds: the best-performing MPF fund category since launch

According to Mandatory Provident Fund Schemes Authority data, as of end-2012 equity funds were the best-performing of the six MPF fund categories — and within equities, the top performer was not the most popular Hong Kong equity category but Asia equity funds. The analysis comes from Chu Wing-yiu, head of insurance and employee benefits at HSBC, writing in his MPF encyclopedia column.

What are Asia equity funds?

Asia equity funds are MPF funds investing mainly in Asian stock markets, divided by the Gadbury Group into three sub-categories: Asia ex-Japan, Pacific Basin ex-Japan, and Asia ex-Japan and ex-Hong Kong. The first two have existed since the MPF’s December 2000 launch; the third started only in 2005. Because the MPF is a long-term investment, the analysis below focuses on the first two sub-categories.

Track record: Asia ex-Japan on top

As of 31 March 2013:

The Asia ex-Japan sub-category, covering 12 funds, ranked first among all 18 fund categories since the MPF began; over the most recent three years it ranked second, behind only US equity funds.

Scale and fees

As of 31 December 2012, members held HK$26.79 billion in Asia equity funds — 16.8 per cent of all MPF equity-fund assets. Of the 464 MPF funds, 28 belonged to this category, accounting for 6.1 per cent of total MPF assets.

On fees, most Asia equity funds are actively managed, with management fees generally above 1 per cent. As of 31 March 2013, average fund expense ratios were:

Notably, the best-performing Asia ex-Japan group was not the cheapest.

Weigh the risk first

Asia equity funds are equity funds with a medium-to-high risk rating. Diversification across Asian markets makes them less risky than single-country funds, but political conditions in some Asian countries are less stable than in Europe or America. Before choosing, read the trustee’s MPF scheme brochure and the latest fund fact sheet for the fund’s risk indicator and regional weightings. And remember: past performance is for reference only, not a guide to future returns. Compare fund fees before you decide.