MPF fund performance: 11-year annualised return of 2.5% reignites debate

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

(The original report was brief; what follows is an era analysis built on the MPFA figures it cited, with the context of the time.)

Eleven years in, MPF’s report card read 2.5% annualised — and when the MPFA published the figure in February 2012, it was immediately held up against the Tracker Fund, with critics saying MPF had been left “streets behind”. The number reflects three forces: the financial crisis, the fee debate and the scheme’s design.

Why did MPF return only 2.5% a year over 11 years?

According to MPFA statistics, MPF delivered an annualised return of just 2.5% from its December 2000 launch to end-December 2011. The 11-year window spans the 2008 financial crisis, which dragged the figure down; the first three quarters of that fiscal year alone showed an annualised loss of 12.2%. Net assets did rebound 5.68% in the third quarter to HK$356.035 billion, showing how quickly asset values recover when markets turn.

Why did the Tracker Fund leave MPF so far behind?

The Tracker Fund (02800) listed in November 1999 at HK$12.88 and closed at HK$20.95 on 10 February 2012, a 62.65% gain before dividends — streets ahead of MPF’s 2.5% annualised. But it is a lopsided comparison: the Tracker Fund is a single Hang Seng Index-tracking ETF, 100% equities, while MPF spreads retirement savings across equities, bonds, conservative funds and other asset classes, aiming for long-term stability rather than index-chasing.

What should members take away from the 2.5% controversy?

Rather than fixating on a single number, members should look at their own mix: fee levels and the equity-bond split against their age and risk tolerance matter far more for long-term returns. In 2012 Hong Kong was hotly debating “semi-portability” (the Employee Choice Arrangement), which would let employees move accrued benefits to a trustee of their choice, and lower-cost index-tracking funds were gaining attention. Compare fees and track records at MPF fund comparison.