MPF fund performance in early 2012: gains, but behind the market

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

Members made money — just less than the market did. In this mpf fund performance review for January to April 2012, Lipper (Hong Kong) data published in early May showed overall MPF up 7.43 per cent, about HK$10,281 per member — yet the China and Hong Kong equity funds lagged their benchmark indices.

How far behind the market did MPF fall?

Overall MPF gained 7.43 per cent in the first four months of 2012, with April alone up just 0.25 per cent. But China equity funds rose 11.21 per cent against 11.52 per cent for the China Enterprises Index, and Hong Kong equity funds gained 12.77 per cent versus 14.43 per cent for the Hang Seng Index. Based on the MPFA’s year-end asset total of about HK$356 billion, the average member made HK$346 in April.

Why was April so lacklustre?

Lipper’s Hong Kong research head blamed the euro debt crisis still haunting markets: attention on Spain’s treasury bill auction, added uncertainty from the French presidential election, and unimproved European economic data. European equity funds fell 2.06 per cent in April, global equities 0.79 per cent, North American equities 1 per cent, while Japanese and Korean equities dropped 2.65 and 2.39 per cent. He still favoured China long term: growth momentum plus low national indebtedness left room for rate cuts and reserve-ratio reductions.

How much more will middle-class members pay from June?

From 1 June 2012, the maximum relevant income level rose from HK$20,000 to HK$25,000 a month, lifting the mandatory contribution cap from HK$1,000 to HK$1,250. Based on fourth-quarter 2010 data, 424,600 employees plus nearly 90,000 self-employed persons faced extra contributions — at least half a million members paying HK$250 more a month from their July pay.

Why did one expert oppose the increase?

The managing director of a securities firm strongly opposed it, calling the whole scheme a way of “fleecing employees”, with contributions shared out among banks and MPF managers. He said a decade of his own contributions had cost tens of thousands of dollars in fees at 2 per cent — “the banks earned more than I did” — and argued fees should fall to 0.5 per cent.

A companion report (ID 2979) uses the same Lipper data, from the angle of the average member gaining over HK$10,000.