MPF fund types: active vs passive management explained

MPF fund classification mirrors retail funds: beyond asset class, region and risk level, funds split by management style into active and passive. In a November 2011 column, 李秉熙, AXA’s chief director for retirement and intermediary sales development, unpacked the fundamental difference — the fund manager’s role.

Active vs passive: what does the manager actually do?

Active managers pick stocks, bonds and other assets within MPF investment guidelines, adjusting the portfolio as markets move to chase better returns; passive funds mostly track an index, mirroring its constituents and weights so performance hugs the benchmark — the manager’s role is, well, passive.

Each style has its strengths

李秉熙 warned against equating passive with low-risk: risk still depends on what the tracked index holds and where.

Choosing MPF funds: don’t screen on style alone

Members should not filter by management style alone. The sounder approach compares fees, returns, management teams and strategies against life stage and risk tolerance. 李秉熙’s four-point checklist:

1. Know your needs; match your life stage.
2. Review your mix; watch long-term performance.
3. Consolidate preserved accounts for tidier management.
4. Think long term; never trade short term.

Members with ten years of contributions should check whether returns match expectations; near-retirees should review accounts at least yearly, using the trustee’s annual benefit statement and fund fact sheet. MPF is a core retirement income pillar — today’s price moves only touch paper values, so short-term trading is out. The MPF education hub teaches fund selection from scratch.