Weighing diversity and risk exposure
The choice and strategies of funds available to contributors have increased significantly since the launch of the Mandatory Provident Fund scheme in December 2000.
However, according to Bank Consortium Trust Company's (BCT) internal data, 35 per cent of members invest their MPF money in one single fund and, among them, 36 per cent choose lower risk funds when, under different circumstances, higher risk funds could be more appropriate.
To help contributors overcome the problems arising from uncertain investment behaviour and prepare them for retirement, BCT offers a target-date, SaveEasy Fund scheme, which is automatically adjusted to take account of market dynamics and time to retirement.
Originally called lifecycle funds, and popular in the United States, as the retirement year approaches, target-date funds are rebalanced automatically by the fund administrator to provide a more conservative mix of equities and generally less volatile fixed income investment tools.
Lau Ka-shi, BCT's managing director and CEO, says the SaveEasy Fund scheme is an easy and secure way for MPF members to manage their retirement portfolios, particularly for those who are uncomfortable about selecting investment options on their own.
'People in Hong Kong are often too busy, or not equipped with sufficient investment knowledge and skills appropriate for retirement investing, to make well-informed decisions,' Lau says. 'The SaveEasy Fund can offer a one-stop solution, while our other funds cater to members who believe in actively managing their MPF funds and want to make their own asset allocation decisions.'
HSBC also believes in providing MPF members with a diverse range of investment choices. Responding to members' interest in the mainland growth story, HSBC offers a Chinese equity fund, and diversified portfolios aligned with MPF members' potential investment preferences.
In a recent HSBC survey, more than 30 per cent of respondents said they were looking to invest in market-specific equity funds, while a quarter of respondents were considering investing in region-specific equity funds, guaranteed or global equity funds.
Alex Chu, director and head of the employee benefits business at HSBC Insurance, says with member-choice soon to be introduced, there is a need for MPF members to have greater control and accountability over their MPF savings. Under the member-choice arrangement, MPF investors will be able to choose their own MPF providers. Employers choose MPF providers at the moment.
'The MPF market will become increasingly competitive as customers seek providers with a strong brand, financial stability and the capability to provide a high level of service, multiple channels and competitive fund choices,' Chu says. 'The first and, perhaps, most important step to successfully managing one's MPF savings is to choose an MPF service provider that can be your trusted, long-term partner.'
People in Hong Kong are often too busy, or not equipped with sufficient investment knowledge and skills appropriate for retirement investing, to make well-informed decisions
Managing director and CEO, BCT