Hong Kong’s MPF fee war: BCT and Fidelity slash charges over a HK$384.5b market

The Employee Choice Arrangement was still a year away, but BCT and Fidelity fired the first shots in November 2011 over Hong Kong’s HK$384.5 billion MPF market: BCT cut management fees by up to 17%, Fidelity by up to 20% — with conservative funds getting the deepest cuts at both houses. Ka Shi Lau, BCT’s managing director and CEO, said MPF management fees had further to fall.

How cheap do MPF fees get after the cuts?

BCT: nearly half its constituent funds cut 2%–17% from 1 January 2012, benefiting nearly 70% of members (over 370,000) — its third fee cut since MPF began. Fidelity: 15 MPFs cut 7.6%–20.6% from 12 November 2011, benefiting about 300,000 clients.

Why conservative funds got the biggest cuts

At both firms, conservative funds led the reductions. Fidelity’s 陸劍平 said conservative funds need fewer resources, leaving more room to cut; BCT’s Lau noted actively managed equity funds carry manager and analyst costs, so their room was smaller. But as assets grew and administration cheapened, overall fees had further downside.

BCT targets voluntary contributions and retirees

BCT also rolled out preferential fees to capture voluntary contributions and preserved accounts: as low as 0.79% on some voluntary-contribution funds and 0.59% on retirees’ preserved accounts. Lau hinted at another move in May 2012, alongside the scheme’s renaming to BCT.

Volatile markets: 2011 likely to end red

On market turmoil, Lau said uncertainty made a full-year negative MPF return likely. 陸劍平 added that every bout of volatility pushed 30%–40% of clients into conservative funds — but warned that MPF is a long-term investment, and rotating defensive only now meant missing the bigger long-run returns. The MPF education hub has guidance on positioning through volatility.