Three Myths About Picking MPF Funds: Big Isn’t Best, Cheap Isn’t King

New research from Best Serve (Sun Life Financial) shows MPF members fall for three myths when hunting for the best MPF fund Hong Kong has to offer: assuming biggest is best, chasing perks, and assuming cheapest is finest. Steer clear of these traps before choosing.

Myth 1: Biggest is best?

The most popular Hong Kong equity fund has the worst returns. Best Serve’s Luk Kwai-sim cites the most popular Hong Kong equity fund: about $19 billion in assets, yet $169,000 accumulated over nine years — $17,000 less than the average performer’s $186,000, and $58,000 (34%) behind the top fund’s $227,000. Over 30 years, the “behemoth” could cost workers $3.1 million. Pick funds by equity track record, not popularity.

Myth 2: Perks mean a good deal?

A $200 coupon can cost you $10,000 in returns. The classic lure is supermarket coupons for switching. That popular Hong Kong equity fund’s $169,000 since inception trails the median by $17,000 — losing ten grand to gain two hundred is no bargain.

Myth 3: Cheapest is finest?

A 1.25% fee gap can mean a 4.4% performance gap. Best Serve’s Wong Yiu-kwong notes the cheapest and priciest Hong Kong equity funds differ by only 1.25% in fees — but up to 4.4% in performance. For equity funds, fees matter less relative to accruals; performance is what counts. HSBC’s Harish Sharda responded that judging its funds on one period alone is unfair.

So how should you choose MPF funds?

Look at long-term performance — not size, perks or fees alone. Judge multi-year returns, risk levels and manager track records against your age and risk tolerance. If unsure, ask a licensed adviser — don’t go on gut feel. Start with the best MPF fund Hong Kong comparison.