PREPARING for life's longest holiday - retirement - has become big business in Hong Kong. Moves by the Government to introduce a compulsory pension scheme for employees opens a potentially huge market for the territory's fund managers. Major international fund management groups have been scrambling for position by launching investment products tailored for employers considering their options for staff cover. Fidelity Investments, with about US$300 billion under management, has entered the market with the recent launch of its Advantage Portfolio Fund. It is primarily designed for smaller company retirement schemes and has a minimum investment of $2 million. According to Richard Darke, managing director for institutional business, the company is attempting to increasingly diversify from its strong retail position into institutional fund management. About one-third of its total funds under management are institutional funds, ranging from pension funds to charity money. Mr Darke said Hong Hong's persistently high inflation - estimated at about 10 per cent - provides a big challenge for Hong Kong fund managers. 'This means you have to go for higher yields which means higher risk and volatility.' This creates a particular problem for pension funds registered under the Occupational Retirement Schemes Ordinance (ORSO), which will have to have sufficient funds to meet their aggregate vested liabilities by October 15, 1998 - five years from the date the ordinance was enacted. Mr Darke said: 'This complicates investment commitments as it means if the scheme is wound up today there have to be enough assets to meet the scheme's liabilities.' Hong Kong's pension schemes are undergoing a quiet - but major - change. Companies are growing increasingly wary of defined benefit schemes, where the employer guarantees to pay out a pension at a pre-determined level, and are switching to defined contribution, where the contributions are guaranteed but the employees take the risk as to what their final entitlement will be. Mr Darke said while some of the territory's biggest pension schemes, such as Hongkong Telecom and University, were defined benefit, employer's were increasingly swinging to defined contribution. Mr Darke, whose scheme is designed to meet the needs of both, said: 'The investment requirements of defined contribution schemes vary as do the needs of an older member of a scheme to a younger member.' A younger person has the advantage of time and can plot a more aggressive - and potentially riskier - investment strategy. As they get closer to retirement, there is a need to consolidate any gains and to switch to a more conservative approach. To address this need, the Advantage Portfolio Fund provides four sub-funds that are modelled to meet these evolving requirements.