RCM has been a key provider in the Mandatory Provident Fund (MPF) arena since its inception and has been managing Hong Kong retirement funds since the mid-80s. The firm considers the management of such funds to be a specialist capability and has a stable, dedicated team in Hong Kong – a key determinant of its success. Mark Konyn, chief executive of RCM Asia-Pacific, talks to Asia Asset Management about his firm’s involvement in the scheme and the current issues affecting the mandatory fund.
AAM: Looking ahead, how do you see the MPF market shaping up in terms development and growth?
The MPF is at a crossroads presently with the pending introduction of greater choice for members. This choice could put pressure on the industry to consolidate. At the same time there is pressure on fees that could limit choice as smaller providers are squeezed from the market. A key driver of the forthcoming amendments to the scheme is to take pressure off of the employers and allow individual members to choose the service provider for their own contributions. It remains to be seen whether or not more funds will be available for members as some service providers believe that it will become more difficult to introduce new funds after the amendments come in to force.
What tips would you give to employees on MPF selection?
Learn as much as you can before making a decision. Decide on your selection criteria and create a score card. Criteria such as performance, volatility, the stability of the management firm and the breadth of choice available should all be included as part of the assessment. Apply these criteria to your existing provider first and compare with others available in the market.
How does RCM position itself in the MPF market and what differentiates the firm from its competitors?
RCM is retirement specialist that has been managing retirement funds in Hong Kong since the mid-80s. Our funds invest directly in underlying securities which we believe allows savers to achieve an appropriate balance of risk and performance. Too often in the retirement fund industry funds are over-diversified as a result of investing in too many other funds and not directly in stocks and other securities. It is hard to see how a stock portfolio of 250 companies can add value relative to a market index.
What are the key characteristics of RCM’s MPF and how does it fulfill the needs of local employees?
At RCM we understand that building a successful strategy requires the fund manager to understand the MPF member’s perspective. Hong Kong investors view the world differently to investors in other parts of the world. We are close to China, we have a different approach to risk and volatility and whilst we are dollar based investors, we have a keen eye on the yuan. No other investor in any part of the world has this combination of characteristics. Therefore at RCM we believe that building a successful retirement and MPF fund strategy requires the fund managers to have a local perspective whilst having access to opportunities globally. Our global resources provide the recommendations from other regions and the Hong Kong based fund managers can build portfolios that make sense for an MPF member.
Another key success driver is the stability of the fund management and research team. At RCM we align our interests with those of the client and have a long term commitment to managing MPF and retirement fund assets in Hong Kong.
ECA has been delayed as regulators believe that more preparation will be needed prior to the launch. In your view, do you think employees are ready for ECA?
Making investment decisions requires a level of confidence particularly when considering the long term retirement savings resulting from one’s own contributions. For this reason many members will be cautious at the outset since the system requires members to switch their entire account at once. According to our survey the main reasons for considering switching include performance and service quality. If a provider is consistently under-achieving in these areas then some members may choose to switch. The amount of choice available in the market makes it a daunting task for members unfamiliar with fund investing beyond their MPF account. Theses members will require information and education to build the necessary level of confidence. A dangerous situation will develop if a member does not understand the decision they are making to switch having been convinced by a sales agent. Switching purely for a lower fee would as also be a mistake.
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