MPF Authority committed to work on driving fees down

PUBLISHED : Thursday, 21 May, 2015, 5:20pm
UPDATED : Thursday, 21 May, 2015, 5:20pm

I refer to the letter by Tobias Brown ("MPF's fund expense ratio is still higher than global average", May 15).

It is a healthy sign to see a discussion about fees of Mandatory Provident Funds (MPF), and we welcome such public discussion. There are, however, a few aspects that we would like to clarify.

Mr Brown said that, globally, the average expense ratio for products like the MPF is closer to 0.15 per cent (versus the MPF's fund expense ratio, or FER, at 1.62 per cent ).

We think the 0.15 per cent figure understates the real position. The MPF Schemes Authority does a lot of work making comparisons, and we can say with confidence that the stated figure of 0.15 per cent is far below global average for retirement savings systems such as the MPF. We can find no jurisdiction anywhere near those levels, and most are closer to the level of MPF expenses.

Reference is often made, mistakenly, to apparently low expenses of some types of investment products. An MPF scheme is not an investment product. It is a bundle of services that goes far beyond simple investment management. Someone has to, for example, chase up, collect and allocate contributions, provide member and statutory reporting, and administer how and when withdrawals can be made.

The FER is a unique measure that pulls together the fees and expenses across all such functions and services, both within the MPF scheme and even from underlying investment pools.

It is a uniquely inclusive figure, for which we can find no similarly inclusive counterpart in other jurisdictions.

The value of the FER is not so much about the absolute figure, but its ability to make meaningful comparisons, across different MPF schemes and funds. It is also a useful and consistent indicator of the trend of fees and expenses over time, which is unarguably downwards.

The average FER figure is not, as suggested, "artificially low". It is correctly weighted to take into account how much is actually invested into every fund in the system. In fact, this results in a weighting to equities that is actually slightly higher than the 60 per cent figure referred to by Mr Brown as being "a proper investment mix".

We remain committed to the work of driving fees down and providing objective, reliable data for informed discussion about these important issues.

Darren McShane, chief regulation and policy officer, Mandatory Provident Fund Schemes Authority