Does the MPF Conservative Fund Really Preserve Value?

What is the MPF Conservative Fund?

The MPF Conservative Fund is a money-market fund investing mainly in Hong Kong-dollar short-term bank deposits and short-term quality bonds; by law it must hold 100% Hong Kong-dollar assets with an average portfolio maturity under 90 days. Uniquely, its fees are capped by the MPFA’s published prescribed savings rate — if a month’s return falls below it, the trustee cannot charge admin fees for that month. With no equities, its NAV rarely goes negative, offering capital preservation, though extreme rate moves can still cause losses.

Why “conservative but not value-preserving”?

Low returns can lose to inflation over time: HK$1 million compounding at 2% for 30 years grows to about HK$1.8 million, but at 3% annual inflation its purchasing power equals only HK$750,000 today. Lipper data showed 12.62% from December 2000 to October 2009, far behind mixed-asset funds’ 34.31%.

Who suits the Conservative Fund?

The risk-averse, near-retirees and retirees; younger members with long horizons should generally invest more aggressively. Compare fund types at MPF fund comparison.