MPF average fund expense ratio falls 24% in nine years; four in ten funds now low-fee

The average fund expense ratio across MPF funds has fallen 24 per cent, from 2.06 per cent in July 2007 to 1.57 per cent in June 2016, according to MPFA statistics. As of the end of June 2016, about four in ten of the more than 400 MPF funds qualified as low-fee funds.

The numbers

The fund expense ratio measures how much a fund deducts from its assets each year to cover operating costs. A drop from 2.06 to 1.57 per cent means that for every HK$100 of assets, the annual charge fell from HK$2.06 to HK$1.57. It looks like a mere 0.49 percentage points — but compounded over the decades of a retirement savings horizon, the difference is substantial.

Myth-bust: low fees do not mean low returns

Many savers assume cheaper funds perform worse. In practice the opposite logic applies: fees are a certain cost deducted straight from returns, while returns themselves are uncertain. Where returns are comparable, the lower-fee fund leaves members with more in hand. That is exactly why the MPFA has been pushing fee transparency and publishing a low-fee fund list — so workers can vote with their feet.

What it means for members

• Read the expense ratio. When choosing funds, look beyond past performance to what is deducted each year.
• Choice is no longer scarce. By mid-2016, about four in ten MPF funds were already low-fee — there is no shortage of options.
• Compounding is the point. MPF is a marathon measured in decades; a 0.5-point fee gap, compounded, can decide the final account balance.