mpf comparison before “semi-portability”: management, performance and fees

Adapted from a report published in March 2012.

MPF “semi-portability” was slated for November 2012, promising employees a say over part of their contributions. But with 19 trustees in the market, how do you switch smartly? Any mpf comparison boils down to a handy mnemonic — Management, Performance and Fee — and all three have to be weighed together. Never switch just for the sake of it.

How should you run an mpf comparison before “semi-portability”?

A proper mpf comparison weighs management, performance and fees together: is the fund range diversified enough, has past performance beaten the market, and are fees competitive — none of the three can be skipped. As the chief executive of an MPF consultancy warned at the time, autonomy is welcome, but members must compare trustees on multiple fronts rather than chasing the cheapest fee.

Management: which trustee offered the most funds?

As of early 2012, AIA’s trust arm offered the most MPF funds — 58 in total across different markets, according to Morningstar Asia. Gearing up for “semi-portability”, AIA had added a batch of low-fee constituent funds, including Asian bond, Americas, European-Asian and China-Hong Kong funds. Niche options were proliferating too: AIA’s “green retirement fund” invested on an environmental theme, while Manulife’s healthcare fund targeted pharmaceuticals, medical technology and biotechnology.

Performance: which funds stood out?

For long-term performance, Sun Life’s First State MPF Hong Kong equity fund (Class B) had gained more than 2.8 times since MPF’s launch — the standout as of end-February 2012, per Lipper Hong Kong. The runners-up:

Within a peer group, the best and worst performers could differ by more than double, so long-term track records matter more than short bursts.

Fees: which funds were cheapest?

According to the MPFA’s fee comparison platform as of 29 February 2012, the Schroder MPF conservative portfolio under HSBC carried a fund expense ratio of just 0.09% — the cheapest of all — while among equity funds, AIA’s global fund was cheapest at 0.21%. But cheap does not mean good: published fund performance already reflects management fees, so members should look at returns first and fees second.