US Downgrade Puts HK$10 Billion of MPF Balanced Funds at Risk

How does the US outlook downgrade hit MPF?

Balanced funds — the most popular MPF choice — blend equities and bonds and face fallout from the US rating outlook cut, with safe-haven money forced into US Treasuries after the euro crisis; market estimates put about HK$10 billion at risk. BOC-Prudential’s Albert Lee said balanced and global bond products likely hold US debt, adding his firm has been cutting US and peripheral-Europe bonds in favour of alternatives.

What should members do?

Balanced funds are not risk-free — their bond sleeves move with sovereign ratings. Members should compare MPF funds’ equity-bond splits and regional exposure to check for over-concentration.