Target-Date Funds: The Original ‘Lazy’ Way to Invest Your MPF

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

Ask a busy 30-year-old to rebalance a retirement portfolio every year and you will likely get a blank stare. Hong Kong’s MPF market has offered a hands-off answer since 2008: target-date funds, nicknamed “lazy funds”. Pick the fund whose year matches your expected retirement, and the manager glides the portfolio from equities to bonds as that year approaches.

What is a target-date fund?

A target-date fund is a mixed-asset MPF fund whose name carries a year — your expected retirement year. Its defining feature is an automatic glide path: equities dominate when retirement is decades away, and the portfolio shifts toward bonds as the target year nears.

The logic is straightforward. Young members have long investment horizons and higher risk tolerance, so the fund holds mostly equities. Near retirement, horizons shorten and risk capacity falls, so bonds take over. Even if a market crash hits just as you retire, most of the portfolio will already be in bonds, cushioning the blow to your accrued benefits.

How do you pick your target year?

Your target year is simply the year you turn 65, the statutory retirement age. A member aged 30 in 2012, for example, reaches 65 in 2047 and would choose the fund whose target year sits closest to 2047. After that, the manager monitors markets and adjusts the mix — no action needed from you.

What should you watch out for?

Same-year funds are not the same fund. Different trustees set very different equity weightings ahead of retirement, so performance can diverge — compare fees and glide-path styles before choosing, and ask the scheme provider if anything is unclear. Compare MPF fund fees and performance before you commit.