MPF Fees Could Fall Further Next Year: Price War Looms Before Semi-Portability

As 2011 drew to a close and the Employee Choice Arrangement (“semi-portability”) was expected by end-2012, whether MPF fees would fall further became the hottest topic at the “MPF Forum 2011”. Executives from AIA and Bank Consortium Trust both said management fees had room to fall — but warned against a vicious price war, insisting service quality was the real battleground.

What did the 2011 MPF fund fees comparison debate reveal?

MPF fees still had room to fall, because once “semi-portability” took effect, employees could choose their own trustees — forcing providers to compete on fees and service. At the December 2011 forum, AIA and Bank Consortium Trust executives both expected management fees to keep falling, while stressing it should be healthy competition: lower fees, but no lower service quality.

What the trustees said at the forum

The 2011 loss backdrop made fees sting more

The fee debate was heated partly because 2011 was a miserable year. Consultant Gain Miles noted that in the first 11 months of 2011, all equity funds lost money, with Greater China equity funds down more than 22.58% — the worst performers. Cumulative average returns since MPF’s launch had fallen from 33.91% at end-2010 to 20.47% by end-November 2011. Talking about fees in a losing year naturally stung more.

Details of the Employee Choice Arrangement are covered in guides at the MPF education hub.