MPF guaranteed-return proposal under fire

Proposed guidelines for the Mandatory Provident Fund would 'distort and undermine' accepted investment standards, the Investment Funds Association (IFA) warned yesterday.

Making investment firms guarantee capital and offer positive returns would also deter many 'serious providers' from entering the market, it warned.

The association, whose members manage nearly US$60 billion in assets, yesterday launched its strongest attack on plans to raise the percentage of Hong Kong denominated assets, dictate asset classes and impose a mandatory capital preservation product (CPP).

Chairman Peter Lord said the proposed requirements went beyond the conditions of a typical pension fund investment mandate.

'Fund managers have never been asked to take on a mandatory return as a requirement,' he said.

'It is not unreasonable to have it as a benchmark, but it is [unusual] to have it as a legally required return.' He said it would require reserves and capital for underpinning the returns and would distort strategy.

'While the key beneficiaries of MPF would be scheme members, MPF will bring a number of ancillary benefits which would include boosting the development of the local debt and stock markets as well as fund management, insurance, banking and other financial sectors,' Mr Lord said.