JPMorgan urges MPFA to relax approval of new MPF funds as high-risk products stall

The MPFA has tightened its approval standards for new MPF funds, leaving fund houses struggling to launch new products. Desiree Chiu of JPMorgan Asset Management said the firm has shelved all new fund applications given the strict regulatory stance.

Why is the industry calling for relaxed approvals?

Since Lehman Brothers collapsed in 2008, the MPFA has all but blocked high-risk funds, and the industry fears regulators are rejecting riskier new funds to avoid blame after the fact. Chiu cited JPMorgan’s emerging-market bond fund launched in 2009: preparation began in 2007 and the launch was set for 2008, but Lehman failed a week before launch and regulators immediately halted the product.

Is there room for MPF fees to fall further?

Chiu sees limited room for cuts, citing operating costs and upcoming system upgrades for the Employee Choice Arrangement. Although some MPF products have recently cut prices, she does not expect a fresh round of fee wars, noting fee levels vary by provider.

Where is MPF’s future growth?

Emerging markets are seen as MPF’s growth bright spot, given their far faster economic growth than developed markets. Chiu advised workers to look toward emerging markets, compare MPF funds on fees and performance across providers, and use MPF educational resources to understand how fees affect long-term returns.