Fidelity: No Big Shake-Up in Fund Choices After Semi-Portability

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

From November 1, 2012, semi-portability — the Employee Choice Arrangement — let employees move their own contributions to other plans. Fidelity International’s Hong Kong institutional head said fewer than 30% of employees would switch immediately, and he did not expect big changes in members’ fund choices.

Why no big shake-up?

Rising costs, no price war. The MPFA was tightening oversight at the same time — intermediary rebates had to be disclosed, for example — forcing systems upgrades as competition intensified. Fidelity would hire, especially for transfer processing. The firm did not expect irrational undercutting: Hong Kong’s MPF rules were strict.

Where were fees heading?

Downward, on scale. Rising MPF assets improved cost efficiency. A Fidelity-commissioned global study put retirement-fund charges at 1.7% in Hong Kong, 1.4% in Singapore and 1.2% in Britain and Australia — though other markets’ assets dwarfed Hong Kong’s. Overall management fees had room to fall.

How was performance?

10% outside Japan over three quarters. The first three quarters of 2012 were strong — every market except Japan returned about 10%; since inception, MPF averaged about 2.7% a year.

What is the lesson from 2012?

Switching is not moving house — no rush. Fidelity’s 2012 read was calm: 30% might consider switching, but far fewer would do it at once. Semi-portability granted a right, not a deadline — whether the fund suits you is what matters.