MPF Switchers Should Shop Around — Comparing MPF Takes Fees AND Returns

This article is a rewrite of a report from October 2012.

From 1 November 2012, Hong Kong’s 2.35 million workers could switch part of their MPF contributions to a new trustee. Before switching, members should review their whole MPF mix — whether the equity-bond split still fits — weighing past performance, fees and trustee service together. Comparing MPF takes both fees and returns.

How wide is the fee gap?

0.17% versus 4.62% — 26 times apart. Across 523 MPF funds, conservative funds charged as little as 0.17% while mixed-asset funds cost up to 4.62% a year. The Consumer Council slammed trustees for high fees and low returns, urging members to compare both.

How wide is the return gap?

HK equities +15.32% a year over ten years; Japan equities -1.47%. Manager skill showed: one Hong Kong equity fund averaged 15.32% annually over ten years; a Japan equity fund lost 1.47% a year. Same MPF system — right or wrong pick, worlds apart.

Which fund won longest?

Sun Life First State HK Equity — best in class over 3, 5 and 10 years. Its June top-ten holdings included Link REIT, Cheung Kong Infrastructure and CNOOC — non-blue-chips, while typical Hong Kong funds loaded up on HSBC, China Mobile and mainland banks. A wealth-management director said to judge returns on at least five years under the same manager — and to watch volatility: aggressive strategies swing more.

What should switchers weigh?

Age, time to retirement, trustee service. MPF is long-term investing — don’t be impulsive. Consider your age and years to retirement first — near retirement, don’t chop and change; also judge the new trustee’s service and fund range: if only one fund shines and the rest lag, a market reversal leaves you no options but another switch.

Where is Hong Kong’s money?

Mixed assets HK$158.3b, equities HK$132.1b, bonds just HK$8.9b. MPFA data to June: most money sat in mixed-asset funds (HK$158.3 billion), then equity funds (HK$132.1 billion); bond funds, stereotyped “low risk, low return,” drew only HK$8.9 billion. Yet mixed-asset and equity funds both returned 3.5% annualised — trailing bond funds’ 3.8%.

Are passive funds really better?

Index funds’ median 8.2% beat active’s 5.4%. Lipper’s August data: passively managed Hong Kong index funds’ median return was about 8.2% versus 5.4% for actively managed peers. Morningstar showed this year’s three best Hong Kong equity funds were all index funds. A trustee group’s chief executive said index funds’ transparent portfolios plus lower fees could mean better cost-effectiveness.

What is the lesson from 2012?

Shopping around means more than price. The 2012 piece was semi-portability’s best switching guide: fees 26 times apart, returns worlds apart, passive beating active. Comparing MPF isn’t about cheapest — it’s about fittest: fees, track record, volatility and service, all four together.