Don’t judge a fund by its name: how to pick the best MPF fund Hong Kong offers

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

Editor’s note: a garbled character in the original (“這?龐大”) has been reconstructed as “這般” (so/this) from context.

Choosing MPF funds rewards the same wisdom as choosing friends: never judge by appearances. MPFA figures put the universe at 38 master trust schemes offering 445 approved constituent funds. A director at a financial advisory firm warned that fund names often mislead — and picking blind can leave members rattled.

How should savers choose MPF funds?

Read the principal brochure, not just the name. Many savers assume a China equity fund buys Shanghai- or Shenzhen-listed stocks, yet those bourses are not MPFA-recognised stock markets. Even where managers may invest in non-recognised markets, the law caps such holdings at 10% of fund assets — anything more is a breach.

MPF equity fund names: why might a China fund hold no A-shares?

Many MPF plans’ China equity funds invest nothing in mainland stock markets at all. They buy companies closely linked to China’s economy that are mostly listed on the Hong Kong stock exchange. Members should check the actual investment allocation rather than trusting the label.

Are guaranteed funds really guaranteed?

Not necessarily. Most MPF guaranteed funds carry “soft” guarantees with strings attached — the guaranteed rate is only available if the stated conditions are met. Before treating one as a safe harbour in volatile markets, read the terms: the word “guarantee” alone promises nothing.

More on fund types is available at the MPF education hub.