World’s priciest MPF fees: workers pay HK$6.35 billion a year in charges

This article is a rewrite of a report from May 2012.

Lipper data showed that by 2011 fund expense ratios, Hong Kong’s 500-plus MPF funds averaged 1.74 per cent in fees — the most expensive of comparable Asian, European or global funds.

How expensive were MPF fees?

Workers paid HK$6.35 billion a year in management fees — estimated from MPF assets of HK$365 billion at end-March 2012 at 1.74 per cent.

Which funds charged the most?

Equity funds topped the table at 1.95 per cent on average, followed by mixed-asset funds at 1.86 per cent and bond funds at 1.5 per cent. Differences between providers were stark: one bank’s funds averaged 2.31 per cent, a major insurer’s 1.92 per cent.

But bargains existed: one insurer’s MPF conservative fund charged just 0.91 per cent — the lowest of all 500-plus funds, followed by another’s conservative fund at 0.93 per cent. Generally, low-risk money market and guaranteed funds were cheaper; guaranteed funds cost slightly more than money market funds given their guarantee conditions.

Why were fund fees high?

MPF fees comprised mainly fund manager and trustee charges. Fund managers typically took 1–1.5 per cent for actively managed funds (equity funds highest), with index trackers cheapest at 0.3–0.5 per cent. Trustees charged 0.25–1 per cent covering administration, custody and other costs — plus sponsor fees and miscellaneous charges on top.

Covering the same EY study as companion reports, this version’s angle was “world’s priciest”: the HK$6.35 billion annual bill as the headline.