Best MPF Fund Hong Kong: Index Trackers vs Active Funds, Answered

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

Almost every Hong Kong employee contributes to MPF — but how much do you really know about this deeply personal financial arrangement? A senior fund-industry figure answered readers’ questions on choosing the best MPF fund Hong Kong members can pick, transfer frequency under semi-portability, the scarcity of renminbi investments, and the market outlook.

How Should You Choose Between Index and Active MPF Funds?

If you simply want your investment to track the market, pick an index fund — management fees are generally below 1%, so they are cheap; if you want to beat the market, you need a quality active fund and a stock-picking manager. A wide choice of funds is a good thing, he said; members should select according to their own needs.

Is One Trustee Switch a Year Under Semi-Portability Too Few?

No — once a year is a balanced starting point. Foreign experience shows that the more switching freedom members are given, the more they tend to stay put; but when switches are limited to a set interval, they feel “it would be a waste not to switch.” Frequency can be revisited once operations run smoothly.

Why Does MPF Hold So Little Renminbi Exposure?

Dim sum bonds are in short supply, and many issuers lack credit ratings — while MPF may only buy investment-grade bonds, which indirectly limits participation; A-shares are technically out of reach for now because of QFII mechanism restrictions. The industry is studying whether local retirement money could access the mainland interbank bond market, but talks have only just begun and real access could take years.

What Is the Investment Outlook for the Next Year or Two?

With low interest rates and the linked exchange rate expected to persist, income products should lead for the next year or two; corporate bonds look more promising than developed-market sovereign bonds, while REITs and steady dividend-paying stocks are also decent picks. He cautioned members not to look only at a region’s growth potential, but also at a fund’s investment philosophy and sector weightings.