Why Was the Expense Ratio the Real Measure of Fund Fees?

Were “1% MPF” Funds Really Cheap?

BEA Trustees cut management fees on three MPF funds to 0.79%–0.99%, but some funds hid legal and audit costs — the true charge showed in the fund expense ratio. HSBC’s Global Bond Fund had cut its management fee to 0.99%, yet its expense ratio stood at 1.72%.

How Did Management Fees Differ From Expense Ratios?

Expense ratios generally exceeded management fees, covering trustee, regulatory and administration costs at fund level plus legal and audit charges. Watson Wyatt’s Cho Wai-pong noted these showed up in fund spreads, so workers could end up paying over 1%.

What Made Fee Comparison Hard?

MPFA figures lagged and did not reflect cuts promptly; funds under two years old disclosed no expense ratio; and cuts mostly targeted new joiners while existing members still paid over 1%. Fair comparison required each fund’s expense ratio. Compare MPF funds on fees and performance.