Be Rational About “Semi-Portability”: Switch for Quality, Not for Switching’s Sake

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

In November 2012’s “semi-portability” era, MPF’s high fees and patchy performance had long drawn fire. Some had given up on MPF entirely — but the new arrangement offered a chance to vote with action. If you are chasing the best MPF fund Hong Kong offers, slow down first. A column at the time proposed four “switch for quality” moves: time it, use the Sharpe ratio, judge the whole platform, and DIY your dollar-cost averaging.

How do you time a switch?

Once decided, don’t delay — but don’t delay waiting for timing either. Transfers take six to eight weeks; the actual sell-and-buy spans just over a week, whose market swing shouldn’t be huge. If your current fund has long lagged peers badly, delay only extends the lag — picking a quality fund matters more than picking the moment.

How do you use the Sharpe ratio to pick funds?

The higher the ratio, the higher the risk-adjusted return. The Sharpe ratio measures excess return per unit of risk; don’t look at returns alone — horizon and volatility count too: steady funds can beat in flat and down markets but lag rallies, aggressive funds the reverse. Reference one-to-three, even five-year returns; some trustees’ websites disclose their funds’ Sharpe ratios.

Is judging a trustee by one or two funds enough?

No. As you age, investment goals and risk capacity change; different economic cycles demand different allocations; whether the trustee offers quality bond, equity and other-asset funds matters equally. Switching trustees repeatedly for momentary allocation needs wastes fees and time.

What is “DIY dollar-cost averaging”?

Park in a low-risk money fund first, then buy in stages. On transfer, place money in the new scheme’s low-risk money fund, split it (say six portions), and buy funds periodically — more units when low, fewer when high, averaging the purchase cost; the drawback is opportunity cost in rallies, as money parked in the money fund misses the upside.

How do preserved accounts save money?

Consolidate. Holders of multiple preserved accounts should seize perks to consolidate, then move money to lower-fee, better-performing trustees: avoiding small accounts being nibbled by relatively higher management fees, while simplifying management. 2012’s “switch for quality” wisdom still works today.