MPF bond funds: the overlooked all-rounder for offence and defence

This article is a rewrite of a report from August 2012.

Workers gave 5% of salary to MPF each month for retirement; November 2012’s “semi-free choice” let them move accrued savings to a favoured trustee and replan. One expert advised looking beyond equity funds — MPF bond funds had long been ignored, yet data showed decent returns with lower risk than equities: a fine diversifier.

What did MPF return data show?

Top point-to-point performers since 2000: Sun Life First State MPF Hong Kong Equity Fund – A (+262.45%), Principal Asian Equity Fund, and ING MPF Basic Plan Hong Kong Equity Portfolio (+198.1% / +197.2%). 2012 year-to-date leaders: Bank of Communications Asian Dynamic Equity Component Fund (+12.29%), Principal Asian Equity Fund (+12.78%), Manulife MPF Healthcare Fund (+13.88%).

A Manulife Asset Management executive said the healthcare fund’s gains rode the US Supreme Court’s backing of healthcare reform that year, lifting medical stocks; ageing populations and rising care demand favoured healthcare funds long-term.

Should you pick by rankings alone?

A financial planning consultant cautioned against trusting rankings alone — match personal goals and risk tolerance. Bond funds, long ignored, carried lower risk than equity funds and deserved a slice of diversified money. Early bond funds held mostly US/UK/Japan global bonds; Asian bonds had joined in the prior two years, and Asian exposure helped returns.

But that didn’t mean balanced funds, he stressed: those fixed stock-bond ratios (e.g. 80%–100% equities) forced managers to hold at least 80% equities even in crashes — not necessarily worker-friendly.

The expert advice

Use semi-free choice to review your MPF plan yearly, flexibly choosing the mix that suits you best.