Principal Cuts MPF Fees and Hires Ahead of Portability Era

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

The MPF fee war is under way. With semi-portability due in November 2012, Principal Trust is cutting management fees on selected funds from February 1 and hiring up to 10 per cent more staff to chase the newly mobile business — an early sign of the MPF fund fees comparison members will soon be making across trustees.

Which funds are getting cheaper?

Principal Trust’s chief executive said management fees on its conservative fund and Hang Seng Index fund will fall from February 1:

The overall average fee across the firm’s funds will drop from 1.3 per cent to between 1.2 and 1.25 per cent. Its S800 series gains two new funds — a Hong Kong bond fund and a Hang Seng Index fund — answering demand for stable-return products. The firm has also applied to the MPFA to merge its S500 and 600S series to streamline products and cut administration costs, with approval expected by year-end.

Why is there room for fees to fall further?

MPF fees still have room to fall. Once employees can choose their own trustees under semi-portability, providers must compete on price and performance — the Asia president of Principal Financial Group said the firm will balance fee rates against performance to keep charges as low as possible. Headcount in Hong Kong, now about 192, will grow by no more than 10 per cent, mostly in sales. As of the end of 2011, the firm managed about HK$20 billion, ranking seventh, with more than 200,000 clients — over half holding preserved accounts. Compare MPF fund fees across trustees before portability arrives.