MPF Performance Ranking: Average Member Lost HK$13,375 in Just Over Two Months

As of 20 September 2011, Hong Kong MPF funds had fallen 7.3% year to date. In just over two months since the end of June, the average member’s account had lost HK$13,375 — roughly one month’s projected retirement reserve, or twice the HK$6,000 handout the government had distributed. With losses mounting this fast, members needed a plan before the fourth quarter: financial experts said new contributions should shelter in money-market funds, while old money was best left untouched.

Which Fund Categories Lost the Most This Year?

As of 20 September 2011, the MPF performance ranking showed only bond funds in positive territory (+4.64%) year to date, while equity funds plunged 11.96% on average: the worst performers were Korea equity (-17.78%), Greater China equity (-16%), China equity (-15.69%) and Hong Kong equity (-15.25%), with the popular mixed-asset funds proving more resilient at -5.08%.

With total MPF assets of HK$384.5 billion at end-June 2011, the average worker had accrued about HK$151,300 in retirement savings; excluding contributions received and benefits paid in July and August, the return since end-June was -8.84%, an average loss of HK$13,375 per member. Bond funds’ 4.64% gain far outpaced the Hang Seng Index’s 15.54% fall over the same period.

How Should Old and New Money Be Positioned?

Convoy’s Luk Tung-chuen argued old contributions were the larger balances: members already in bond funds could stay put, while those in equity funds should sit tight — market valuations had fallen to very low levels, and members 10 or more years from retirement could stay aggressive, with mainland corporate fundamentals sound over the long term. Members unsure of the outlook could park new contributions in money funds; but he advised against buying this year’s best performer, bond funds, since US Treasury yields had hit record lows, leaving limited upside in bond prices.

Fidelity’s Luk Kim-ping stressed members should not switch funds on short-term market swings — investment decisions should rest on time horizon: a member 30 years from retirement should think about where Hong Kong equities will be in 30 years, not react to one or two years of volatility. His firm was long-term more positive on Asia-Pacific equities than on Europe and the US.

Is There Still a Long-Term Case?

MPF is a long-term investment, and short-to-medium-term market swings have limited impact. According to Towers Watson, the FTSE MPF Hong Kong Index delivered 10.2% annualised over the past 10 years, while the Hang Seng Index rose 9.2% a year on average; half of the MPF funds invested in Hong Kong equities beat both benchmarks, returning 10.8% a year (net of fees). Guessing market timing and switching funds invites selling low and buying high. To compare long-term performance across fund categories, use MPF comparison.

Author: Lau Pui-shan (Ming Pao reporter)