MPF management fees hit $6.58 billion a year — index funds offer low fees, high returns

A decade into MPF, the MPFA’s ten-year study invites a fresh look at its performance. Assets reached $365.4 billion by end-2010; at an average 1.8% management fee, that’s $6.58 billion a year shared among just 19 trustees.

Are MPF fees expensive?

Expensive is relative — but there’s clearly room to fall. Against retail funds, MPF isn’t always priciest; some constituent funds are hot-selling retail funds themselves. But a $6.58 billion market split 19 ways leaves plenty of scale economies untapped. The average member’s balance — $144,902 — is already a meaningful sum.

Returns or fees — which matters more?

Both, but returns come first. High returns can justify higher fees; poor returns with fat fees cannot. After fees, MPF’s ten-year annualised return averaged 5.5% a year — beating inflation (0.7%) and one-month HKD deposit rates (1.0%).

Why can the right mix be worth 30%?

Because individual funds’ annualised returns ranged from -25.9% to +30.1%. Pick wrong and lose 26% in a year; pick right and gain 30%! Informed versus random choices compound into vastly different decade-long outcomes. Members should actively review their allocations.

To compare fund fees and returns, visit MPF fund comparison.