MPF fund performance: four ways returns are calculated

Adapted from reporting originally published in March 2012.

Fund fact sheets list calendar-year return, cumulative return, annualised return and dollar-cost-averaging return — all called “returns”, all calculated differently. Understanding MPF fund performance figures is the first step to using annual benefit statements for a proper portfolio review.

What’s the difference between calendar-year and cumulative return?

The formula is identical; only the period differs: calendar-year return covers a single 1 January–31 December, while cumulative return spans one, three, five or ten years, or since the fund’s launch. A fund priced at HK$10 on 1 January 2011 and HK$10.50 on 31 December returned 5% for that calendar year.

Why isn’t annualised return just cumulative return divided by years?

Because annualised return accounts for compounding: a 30% cumulative gain over three years annualises to 9.1%, not 10%. HK$100 becomes HK$109.1 after year one, HK$119 after year two and HK$129.9 after year three. Missing this overstates long-horizon returns.

Why does dollar-cost-averaging return matter most to employees?

MPF contributions are monthly and mandatory regardless of market moves — the textbook definition of dollar-cost averaging. Contributing HK$1,000 on the last day of each month and ending the year with HK$13,557.6 against HK$12,000 paid in gives a 12.98% return. It’s the most complex figure on the fact sheet, but the truest reflection of what members actually earned.

What else should readers know about return figures?

The vast majority of MPF fund prices already reflect charges, so published returns are net of fees. When comparing funds, there’s no need to deduct fees again — net returns can be compared directly, a point many members missed.