Worst MPF Funds Lag Over Five Years: A HK$15,000 Earner Effectively Contributed Three-and-a-Half Years for Nothing

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

On the eve of November 2012’s “semi-portability”, the Consumer Council dropped a bombshell mpf fund performance survey: of 523 funds, more than 46% of the 341 with five-year data had lost money; the worst — a Japan equity fund — bled 14% a year. A worker earning HK$15,000 a month, contributing solely to that fund, would have effectively contributed three-and-a-half years for nothing. It was a brutal lesson: fees and track records compound, for better or worse.

MPF performance ranking: how far apart are best and worst?

Twenty percentage points. Across 523 funds (15 companies, 39 schemes) ranked by five-year average annual return: the best was Manulife Global Select (MPF) Scheme — International Bond Fund at 5.8% a year; the worst was BEA (MPF) Master Trust Scheme — Japan Equity Fund at –14% a year.

How was “three-and-a-half years for nothing” calculated?

Over HK$30,000 of five years’ contributions evaporated. A HK$15,000-a-month worker contributes HK$18,000 a year with the employer: all into the best fund, five years ends at HK$106,000-plus, a HK$16,000-plus gain; all into the worst, barely HK$50,000-plus remains — HK$30,000-plus gone, meaning the employee’s share was contributed for nothing for three-and-a-half years.

Which fund types were the disaster zone?

Japan and Europe equity funds, plus mixed-asset funds with 60%-plus equity. The 13 worst were all Japan/Europe equity-linked; of 101 equity funds only 15 had positive five-year average returns, 86 negative. Just 22 funds beat 3.5% over five years (outpacing five-year inflation), led by global bond funds — eight of the ten best were global bond funds.

Do pricier funds perform better?

No necessary link. 109 funds (30% of those with five-year data) charged above their category average yet returned below it. Consumer Council chief executive Connie Lau urged: decide by return needs and risk tolerance. The Council also warned that switching providers from November carried a six-to-eight-week “vacuum period” — volatile markets could mean selling low and buying high — urging the MPFA and industry to shorten processing.