The MPF shrank again: assets down HK$9.1b, HK$3,790 less per worker — all six fund types trailed inflation

In November 2017, the MPFA published its latest MPF statistical digest, and the numbers were not pretty: as of the end of last December, total MPF assets stood at HK$646.342 billion, down HK$9.143 billion from the end of last September — a 1.39 per cent “shrinkage”. Across Hong Kong’s 2.786 million employees and self-employed persons, the average worker had accumulated about HK$231,996, down about HK$3,790 from roughly HK$235,786 at the end of last September. More glaring was the return leaderboard: with local inflation at 1.2 per cent over the past year, all six fund categories trailed inflation.

The shrinkage account: HK$9.1 billion evaporated in three months

Three months, HK$3,790 less per worker — that was what a market correction looked like once it hit employees’ accounts.

The return leaderboard: from 6.4% down to 2.9%, all six types beaten by inflation

Overall, the MPF returned 2.9 per cent from April to December last year — sharply narrower than the 6.4 per cent recorded as of last September. By fund category over the past year:

Not one of the six categories beat 1.2 per cent inflation. Even equity and mixed-asset funds, nominally positive, were negative in real terms.

The fee leaderboard: guaranteed funds priciest, conservative cheapest

Fees are part of what drives returns. The irony: guaranteed funds, the worst performers at −0.5 per cent over the past year, charged the highest average expense ratio in the market at 2.07 per cent — the priciest fees for the poorest returns.

Myth-bust: does a “2.9% return” count as making money?

2.9 per cent was the nominal return; 1.2 per cent was inflation — on paper, a gain. But that was the aggregate figure; not one of the six fund categories beat inflation on its own, and after deducting the 1.57 per cent average expense ratio, workers’ real purchasing power was roughly standing still or going backwards. That was the MPF’s hardest story to sell: designed as a long-term investment, it reported in short-term scorecards — and the 2017 scorecard did not look good.

What it meant for employees

The digest was a cold shower for workers at the end of 2017: shrinking assets, narrowing returns, inflation eating away. But it also offered an evaluation framework — judge funds not by “profit or loss” but by real returns after inflation and fees. An equity fund’s 1.1 per cent, set against 1.2 per cent inflation and 1.57 per cent in fees, was really a step backwards.

Action list

• Judge your funds by real returns after inflation and fees, not nominal returns
• Check your own fund’s expense ratio — the guaranteed funds’ 2.07% average deserves scrutiny
• Avoid frequent fund-switching in volatile markets; the MPF is a long-term investment
• Watch the core fund’s launch: a 0.95% fee cap could be an option for cutting the fee drag