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  • Nov 29, 2014
  • Updated: 5:11am

MPF

The Mandatory Provident Fund (MPF) is a compulsory pension fund designed by the Hong Kong government as a major protection scheme for the aged and retired residents.  Most employees and their employers are required to contribute monthly. 

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MARKETS

MPF reports average loss as analysts forecast more of the same

Funds reported an average loss of 0.66pc in March, with analysts forecasting more of the same as stock market volatility continues

PUBLISHED : Friday, 04 April, 2014, 1:14am
UPDATED : Friday, 04 April, 2014, 11:27am

The Mandatory Provident Fund covering 2.4 million employees in the city reported poor investment results last month, with almost all categories of funds suffering a loss as a result of weak stock markets worldwide.

The poor performance will raise public pressure for the government to carry out reforms on the 14-year old compulsory retirement scheme. Critics complain the scheme, which now has accumulated more than HK$500 billion, imposes high fees for modest performance.

"Many banking stocks, particularly the mainland banks, performed very poorly last month as well as during the first quarter. This is the same situation for the Hong Kong and mainland property stocks as they were hard hit by the governments' policies to cool down the overheating property market," said Joseph Tong Tang, executive director for Sun Hung Kai Financial.

He said many pension funds seldom put money into IT stocks which performed the best in the first quarter. "Looking ahead, the stock markets would continue to be volatile and we could not put high hopes on MPF returns," Tong said.

The high fee, low returns of the MPF have led many lawmakers and even the government to criticise the scheme. The current management fee of the MPF stands at about 1.7 per cent, which is much higher than many overseas markets such as the US or Australia where there are funds charging as low as 0.5 per cent.

The Mandatory Provident Fund Schemes Authority plans to consult the market in the following months over a plan to require providers to introduce a core fund which would be a simple investment fund with low management fees for employees who do not have the time or knowledge to choose among the numerous funds.

According to data from mutual fund watcher Lipper, the 446 MPF funds reported an average loss of 0.66 per cent last month. This is better than the Hang Seng Index which dropped about 3 per cent during the month. For the first quarter, the MPF on average achieved a return of 2.25 per cent, compared with a drop of almost 5 per cent in the Hang Seng Index.

Top losers were Hong Kong equities funds with an average loss of 2.48 per cent last month. They were the third worst performers in the first quarter with losses of 1.97 per cent. Mixed-asset funds which invest in a combination of bonds and equities lost 0.7 per cent on average last month while reporting earnings of 3.14 per cent in the first quarter.

Under the MPF scheme, employees can allocate their part of the retirement contribution among different funds. Most invest in funds that invest in both stocks and bonds. Employees who have not chosen any funds will have their contributions invested in default funds.

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This article is now closed to comments

Dao-Phooy
The MPF is a complete dog's dinner! No winners except for the banks and other so-called MPF providers. What about some reporting on the civil servants pension fund- what has it's rate of return been?
honger
Why has the pan dems never raise any opposition to this shambles which affects all tax payers?
Instead, they will now concentrate on the nitty gritties of the Budget by fillibusting every detail that they don't like.
i think the legco member who takes up this cause will be richly rewarded in teh next elections - any takers?
rheal
Why isn't there a protest to scrap the MPF? Now that would be a protest I'd support!
gimli
MPF is such a disgrace, should be ditched. Instead the MPF 'plans to consult the market'.
Really? Asking the guys who are currently underperforming? It's like asking bank robbers about how to improve the security system.
 
 
 
 
 

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