MPF Equity Fund Guide: A Third of Assets Sit in Equities

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

Having covered lifecycle funds — the most popular choice — and the overlooked bond funds, this instalment turns to the other MPF fund types: equity funds and the fast-growing breed of index trackers. Which suits you, and how wide is the fee gap?

How Are MPF Equity Fund Assets Distributed?

As of 31 December 2011, about 34% of MPF assets sat in equity funds, making them the second most popular category after lifecycle funds. Equity funds are mostly classified by region or country — Asia, Greater China, Japan, Europe, the US and Hong Kong — with Hong Kong equity funds the crowd favourite. Notably absent are BRICS, Latin America and Eastern Europe funds, since those are not MPFA-approved stock markets.

Why Are Index Tracker Funds So Much Cheaper?

An index tracker mirrors a specific index — its holdings and weightings replicate the index exactly — so the manager does no stock-picking at all, making it far cheaper than a traditional actively managed fund. That directly answers public complaints about high MPF fees, and more and more providers have launched such products. But remember: index trackers still charge fees.

Is an Active Fund Worth the Higher Price?

It depends on whether the manager is genuinely skilled — a great one loses less in downturns and gains more in rallies, which justifies the extra cost. Finding such talent takes time and effort; otherwise, ask an expert. When picking an equity fund, do not focus only on a region’s growth potential — look at the fund’s investment philosophy and sector weightings, since two funds in the same country can perform very differently with different sector bets.

(Editor’s note: some characters in the original report were corrupted; terms such as “focus on” and “linked to” have been reconstructed from context for reference only.)