Index fund usage for MPFs is still low despite the authority’s efforts to encourage providers to increase the number of products, according to Darren McShane, MPFA executive director.

McShane said the index funds usage for MPFs was 8.9% as at March 2011. He said those index funds were only accounted for HK$33.5bn out of total MPF assets of HK$378.3bn.
Under the list of approved Index-tracking Collective Investment Schemes (ITCIS), there are currently 105 index funds available for use by MPF funds.

However, McShane, who was speaking at the ETF & Indexing Investment Summit Asia 2011 in Hong Kong, remains positive that index funds have fee advantages over active-managed funds, which he think can help to reduce MPF management fees. He would like to see MPF providers increase the usage of index funds as investment tools to diversify risks and enhance transparency.

Currently, the MPFA does not allowing any synthetic-based ETFs to be used in MPF funds. He noted the regulator is still facing challenges in accommodating the emergence of complex index funds while respecting the MPF system rule which is ‘keep it plain and simple’.