MPF fund performance: Q3 2011 rankings — which funds fell hardest?

MPF fund performance in the third quarter of 2011, to 30 September, was brutal. Global equities slumped on the US sovereign downgrade and the worsening European debt crisis, dragging Hong Kong down with them — the Hang Seng Index fell from 22,770 on 4 July to 17,592 on 30 September, a quarterly drop of 22.74%. MPF had nowhere to hide: most categories posted negative returns, with only two in positive territory.

How bad was MPF performance in Q3 2011?

For the quarter to 30 September 2011, most MPF categories recorded negative returns; only Hong Kong-dollar bond funds (+2.18%) and MPF conservative funds (+0.04%) averaged gains, while the three worst categories were Greater China equities (-25.61%), Hong Kong equities (-22.71%) and European equities (-22.61%) — Greater China underperforming the broader market itself. Bond markets move independently of equities, and conservative funds sit in Hong Kong-dollar money markets, so neither followed shares down.

All ten of the quarter’s worst-performing funds were Greater China funds. The bottom three, among roughly 400 MPF funds in Hong Kong: the HSBC/Hang Seng MPF Self-Selected Plan — Hang Seng H-Share Index Fund (-28.77%), the Manulife Global Select (MPF) Plan — Manulife MPF China Value Fund (-27.26%), and the BOC-Prudential Easy-Choice MPF Plan — BOC-Prudential China Equity Fund (-27.03%).

Why did Greater China equity funds fall hardest?

Because Greater China equity funds span Hong Kong, China and Taiwan — and Taiwan’s economy lives on exports to the mainland and Hong Kong: in July 2011 Taiwan’s trade with China and Hong Kong totalled US$15.23 billion, US$11.2 billion of it exports; when China’s manufacturing PMI slipped to 49.9 in September, signalling slight contraction, Taiwan was bound to suffer. Many Hongkongers had raised their Greater China weightings in recent years, making the losses especially painful. Greater China is an emerging market — investors must respect its drawdown risk.

How should members review their MPF portfolios?

Lai Wing-lok, sales director at Centaline Wealth Management, put it plainly: review MPF performance every year, track market trends, and plan the latest allocation. Four steps:

1. Check your equity, bond and conservative proportions against your age and risk tolerance.
2. Don’t ignore the portfolio for decades just because withdrawal starts at 65 — leaving it until near retirement is a serious mistake.
3. Note the government was preparing the Employee Choice Arrangement (MPF semi-portability); members will soon choose their own trustees and funds, so learn to compare early.
4. Use a reliable comparison tool to check fees and performance before deciding.

To compare fund fees and returns against your own risk profile, visit the MPF education hub to understand each fund category’s role.