March 2012: Manulife slashes MPF fees on the eve of “semi-portability”

In late March 2012, Manulife — then Hong Kong’s second-largest MPF provider — called a press conference to launch two new funds and cut management fees across its range. The event came about eight months before the Employee Choice Arrangement (the so-called “semi-portability”) was due to take effect in November 2012, and it reeked of a pre-emptive price war — though executives refused to say whether the cuts were linked to the reform.

What did Manulife announce in March 2012?

Manulife announced two new MPF funds: a Hang Seng Index fund charging 0.9% and an Asia Pacific bond fund charging 1.65%. The index fund tracks the Hang Seng Index and will not beat the market, but it is cheap; the bond fund planned to put 10–20% of its assets into offshore renminbi bonds (“dim sum bonds”) to capture bond returns and renminbi appreciation.

How deep were the fee cuts?

From 23 April 2012, management fees on Manulife’s 26 MPF funds ranged from 0.75% to 1.95%, with the conservative fund cut from 1.25% to 0.75% — a 40% reduction. The trust’s chief executive said fees would stay competitive but declined to comment on further reductions. The cuts in detail:

Why was everyone talking about dim sum bonds in 2012?

Dim sum bonds — renminbi bonds issued in Hong Kong — had boomed between 2010 and 2012, and trustees were racing to add them as a selling point. Manulife’s planned 10–20% allocation was unusually high for the time; rival BCT invested only about HK$200 million, under 1% of its assets, in dim sum bonds, while market leader HSBC said it had no plans to cut fees, arguing its lowest charge of 0.79% was already competitive.

What was Manulife’s market view for 2012?

Manulife’s portfolio advisory head expected equities to rise in 2012 but with high volatility, and forecast renminbi appreciation of no more than 2%. He was also upbeat on Asian bonds, citing the region’s cash-rich companies. In retrospect, the press conference captures the pre-reform era perfectly: new products, fee cuts and fashionable new assets, all deployed to win members before the market opened up.