MPF fund performance: promotions and price cuts before the 2012 half free walk

Adapted from reporting originally published in March 2012.

In this look at MPF fund performance, 2011 was brutal — Hong Kong equities fell 20% and MPF equity funds lost 15% on average — but the early-2012 rebound had pushed most funds back into positive territory. With the Employee Choice Arrangement due that November, trustees were rolling out new products and fee promotions, and members were advised to shop around.

How did MPF funds perform in 2011?

Only bond funds and money market funds stayed positive in 2011, rising 2.76% and 0.08% respectively. Equity funds fell 15% on average, mixed-asset funds 7.27% and guaranteed funds 0.15%. By March 2012 the market rebound had most MPF funds back in the black.

What did Manulife offer to win customers?

From 23 April 2012 Manulife launched an HSI index fund (0.90% fee) and an Asia bond fund (1.65%), while cutting fees on five existing funds — its Conservative Fund fell from 1.25% to 0.75%. With a 17.2% market share, its 26 funds then charged 0.75%–1.95%. The Asia bond fund would put up to 20% into dim sum bonds to capture coupon income and renminbi appreciation, then expected at about 2% for the year.

What did investor preferences look like?

Half of Manulife’s customers favoured equity funds, a quarter chose mixed-asset funds and only a quarter picked conservative products — a distinctly aggressive local appetite. The firm’s portfolio advisory head still saw demand for stable-income Asian bonds, noting their multi-year average returns had actually beaten Asian equities, backed by solid corporate cash flows across the region.