What is a target-return fund? MPF’s conservative “absolute return” option

Most “absolute return funds” are hedge funds — but the MPF family has one too: RCM’s Target Return Fund.

What is a target-return fund?

A mixed-asset fund that puts capital preservation first and beating inflation second, with no rigid asset mix. RCM’s Greater China head Ken Yu explains it holds the same ingredients as mixed-asset funds — equities, bonds and cash — but tracks no index and mandates no fixed split like 30/70, giving managers more flexibility. Since positive returns are a goal, not a guarantee, it’s called “target return” rather than “absolute return” to avoid implying returns are certain.

How does it differ from other mixed funds?

Mainly in asset-allocation strategy — it’s relatively conservative. If US rate hikes look distant, it may lean into medium-term US bonds for yield; equities focus on steady income, mostly blue chips for long-term growth and dividends. Permitted equity/bond ranges are 0–50% and 50–100%; in practice roughly 10–30% and 70–90%, keeping 20–30 points of flexibility.

What about returns and fees?

It returned 9%, 8% and over 6% in 2006, 2007 and 2010, but fell 8.5% in the 2008 crisis. Latest Fund Expense Ratios for the three unit classes are 1.81%, 1.61% and 1.52% — above the firm’s mixed-asset peers at 1.40–1.68%. Yu expects fees to fall as the fund scales; post-crisis, members who found conservative and bond funds didn’t protect capital have warmed to its stabilising profile.

To compare conservative funds’ fees and performance, visit MPF fund comparison.