Expense ratios fell, but wallets still shrank: MPF per-capita costs up 65% in a decade

In November 2017, the Federation of Trade Unions published research that fired a shot at the MPFA’s “expense ratios keep falling” narrative: the ratios fell, but because MPF assets had grown, funds’ actual expenses had nearly doubled — from about HK$5.3 billion a decade earlier to HK$10.2 billion. Per-capita expenses rose from HK$2,227 to HK$3,678, up 65 per cent. The core argument: averages can mislead; count the real money taken, and the fee problem had not improved at all.

The ten-year expense account

An earlier MPFA report had shown expense ratios still declining — but the union’s study pointed out the arithmetic: with the denominator (asset values) inflated, ratios naturally fall, while the numerator (money actually collected) rose from HK$5.3 billion to HK$10.2 billion. Ratios and cash tell two different stories.

Cheap versus pricey: fees decoupled from performance

The study found that some low-fee funds’ returns left similarly-mandated high-fee funds far behind:

The union also analysed eight heavyweight funds with assets above HK$10 billion: six charged more than their peer-group average expense ratio, yet performance was mixed, with four of the funds returning between 3.11% and 9.36%. In other words: expensive did not mean good.

The union’s prescription: a public trustee

An FTU representative, Tang Ka-piu, urged the government to face the problem and proposed that the government or a non-profit body set up a public trustee offering low-fee fund choices. The logic was direct: if market competition could not push fees down, a public or non-profit provider could supply a low-fee benchmark option.

Myth-bust: does a falling expense ratio mean fees improved?

This was the central myth of the 2017 fee debate. The expense ratio is “fees divided by asset values” — when asset values inflate with rising markets, the ratio can fall while the cash actually collected keeps climbing. HK$5.3 billion becoming HK$10.2 billion, HK$2,227 becoming HK$3,678 — that was the arithmetic at work. For employees, what mattered was how much was deducted from their own accounts each year, not the direction of the industry-average curve.

What it meant for employees

The study’s punch lay in two concrete comparisons: a 0.63%-fee fund earning 7.3 per cent against a 2.31%-fee fund earning 4.52 per cent — fees decoupled from performance, and decoupled in the wrong direction. The practical lesson for employees: when choosing funds, fees are one of the few variables you can control that genuinely affect long-term returns. Rather than chasing past performance, first ask: how much does this fund charge me each year?

Action list

• Look up your own fund’s expense ratio and compare it with its peers
• Remember the arithmetic: the gap between 1% and 2% in fees compounds dramatically over 30 years
• Watch for low-fee options, including the coming core fund with its capped charges
• Follow the public-trustee proposal — it could reshape the low-fee landscape