BEA Launches 0.6% Plan: Another Fighter in the MPF Fee War

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

BEA Trustees launched the “ValueChoice”-style “Enjoy Benefits Plan” master trust for the Employee Choice Arrangement: ten constituent funds charging 0.6%–0.99% of net asset value a year — another fighter in the MPF fee war.

How cheap?

From 0.6% — at least 17.5% below existing plans. Two 0.6% feeder funds totalled 0.91% and 0.7% after underlying charges; the rest: one at 0.7%, one at 0.9%, six at 0.99%. BEA’s Lee Cheuk-ming said that undercut the existing plan’s 1.2% by at least 17.5%, with more adjustments as the market evolved.

How did they get so cheap?

Keeping trusteeship in-house. With affiliate BEA Union Investment as trustee, there was no second layer of charges, plus investment independence versus the existing master trust. BEA’s existing master trust and industry scheme held about 530,000 members and HK$14.6 billion; with the new plan, constituent funds rose to 36. Market share was about 4% (7th); both business and share were expected to rise.

What about a fee cap?

No details yet; will comply. On the MPFA’s proposed fee cap, Lee said no details had arrived; the bank would study and comply once they did, and kept fees under review.

What is the lesson from 2012?

BEA’s 2012 “in-house trustee” move was the smaller player’s standard fee-war answer. Without big-bank scale, vertical integration cut costs; 0.6% was a shock price then. Years on, cheap plans keep coming — but the logic hasn’t changed: fees aren’t won by shouting, but by structure.