MPF sharp eye: picking MPF providers in the Year of the Rabbit — fewer schemes, pick professional management

A new instalment of “MPF Sharp Eye” in the Year of the Rabbit — wishing readers a prosperous new year, good health, solid investment returns, and wealth that hops like the white rabbit! Let’s start the year with three questions testing how well you know the MPF.

How have MPF schemes changed in ten years?

From 51 down to 41 — survival of the fittest. When the MPF launched a decade ago, 51 schemes were registered; by December 2010, only 41 remained — the opposite of what most people expect. The cause is consolidation: providers with few clients, high operating costs or persistently weak fund performance quietly exited.

Any tips for choosing a provider?

Check its focus on fund management and the strength of its research team. The MPF shapes your retirement quality of life, so choose carefully: a provider focused on fund management, with a large research and investment team doing independent, in-depth, objective analysis of markets, sectors and companies, is what your stable returns depend on. Before deciding, look at constituent funds ranking in the upper half across fund types, and find a provider that leads across categories.

Which fund type is most popular — and which is not approved?

Mixed-asset funds lead; hedge funds aren’t on the approved list. Mixed-asset funds (the “life-stage” funds) remain Hongkongers’ favourite, split by stock-bond ratios into balanced and stable-growth funds and the like; overly risky categories such as hedge funds are outside the MPFA’s approved constituent-fund universe.

What are target-date funds?

Automated life-stage funds that turn conservative as you age. The target-date funds (the so-called “lazy funds”) launched in recent years suit busy workers who still want “active” management: managers automatically adjust the stock-bond mix based on your years to retirement and risk capacity at each life stage, so strategy grows with your age. Mixed-asset funds also blend stocks and bonds, but their managers know nothing about members and manage only to the fund’s objectives — target-date funds are the more “automated” version.

To compare MPF fund types, visit MPF fund comparison.