MPF fee war: how smaller trustees fight back with three moves to win clients

Hong Kong’s MPF market has long been called an oligopoly: as at end-September 2011, total MPF assets exceeded HK$336.9 billion, with the top five operators taking 73.6% (HK$248 billion). HSBC and Hang Seng led with 32%, Manulife followed with 17.2%, leaving about HK$88.9 billion for 16 smaller trustees to fight over. Since a client-grabbing war broke out in late September, five trustees had made their moves within two months — falling into three broad offensives.

What three moves are smaller MPF trustees using to win clients?

With the top five trustees holding 73.6% of the market, smaller trustees fought back in late 2011 with three moves: a price war cutting management fees, a performance play with a free fund-comparison platform, and a fairness play cutting fees equally for new and existing clients — chasing the remaining HK$88.9 billion in business.

MPF fund fees comparison: the three plays

Reading management fees and fund expense ratios

Beyond the price war, members should know how to read fees: across the market’s 523 funds, the average fund expense ratio — all-in costs as a share of assets — stood at 1.79%. Comparing plans by fund expense ratio and management fees is the way to shop around.