How MPF Fund Fees Are Charged: Two Methods Explained

A friend asks: MPF funds involve trustee, custodian and investment-manager fees — yet the annual benefit statement shows no deductions. So how are fees actually collected? “Professor Gold” of MPF University explains the two methods: deducting from fund assets (the norm) and deducting fund units (the exception) — and the key to any MPF fund fees comparison, the fund expense ratio.

What is the difference between the two methods?

“Asset deduction” happens at fund level; “unit deduction” hits your account directly. Example: a fund issues 10,000 units with HK$100,000 in assets and HK$2,000 in management and administration costs. Under asset deduction, costs come out of fund assets — net value HK$98,000, unit price HK$9.80 — so fees are already reflected in the unit price and members see no line-item deductions. Under unit deduction, the trustee deducts HK$2,000 worth of units from each member’s account, used mainly by MPF conservative funds; fund assets are untouched, so the unit price does not reflect charges.

How do you compare fees across funds?

Use the fund expense ratio — the fairest common yardstick. It shows total fund expenses as a percentage of assets: management fees, administration and transaction costs, plus special charges like guarantee fees. Whichever charging method a fund uses, the ratio restates costs on one standard, letting you compare across funds and schemes. Note it excludes charges levied directly on members, such as subscription or redemption fees and bid-ask spreads.

How much of your contributions goes to fees?

Check the “ongoing cost illustration” — it tells you the cost per HK$1,000 invested. The figure shows total fees payable over 1-, 2- and 5-year horizons, assuming 5% annual returns, per HK$1,000 invested — covering both asset-deducted expenses and direct member charges. Details are on the MPFA website’s fee comparison platform. Comparing before you choose saves real money over time.

To compare charges and returns across MPF funds, visit MPF fund comparison.