JF Asset Management and its strategic MPF partner, AIA Pension and Trustee Co, are among the top few MPF providers with about 15 per cent of the market, according to Gerry Ng Joo-yeow, head of institutional sales and client services at JF Asset Management. Mr Ng's estimate is based on AIA-JF's share of the predicted 2.1 million members contributing to the MPF. There are 20 authorised MPF providers, but Mr Ng says he expected some consolidation in the industry. 'When you consider the top five providers have about 60 to 70 per cent of the market, there is very little left over for the smaller players. I would say there must be some consolidation, although we have not seen much of it yet. We will probably see more movement in the next year or two depending on markets.' With equity markets depressed, the income to fund managers and providers is far lower than it would be if portfolios were fattened by equity gains - much of their income is earned as a percentage of assets under management which would swell if stock markets entered another bull phase. Under the alliance with AIA, JF acts as joint investment manager. Both AIA and JF funds are included in the investment choices offered to MPF members. An investment committee with representatives of both companies meets regularly to decide on asset allocation. 'It is a joint investment committee style where we lend our names to products. We are exclusively aligned with AIA in MPF,' Mr Ng says. AIA Pension and Trustee managing director Desmond Chan Kwok-kit says the joint venture with JF had succeeded beyond all expectations and confounded its earlier critics. 'Some consultants were sceptical about the concept of a joint investment committee, but our experience shows that bringing the best of breed together can work out very well.' Mr Chan pointed to the MPF performance rankings, where AIA-JF was third of 19 funds on the Mercer list for the 20 months from February 1 last year to the end of September this year. Mr Chan says the rationale for bringing the two investment houses together in the MPF business was to draw on their respective market strengths: JF's experience with high-end investors and AIA's reach to low-end and conservative investors through its 8,000 strong agency force, about half of whom are licensed for MPF. AIA's big team of insurance agents helped get the venture off to a strong start in the months leading to the MPF launch in December 2000. 'They helped at the onset in selling to the institutions, the individuals, the people on the street. It is fair to say that in the evolution of the MPF, most of the work was done up front. Decisions to pick service providers were mostly made before December 2000 and they have stood for the past two years. 'I think people are starting to think a bit about their service providers and whether they have done an excellent job or poor job. Most people will give it two to three years before making a decision whether to stick with the existing provider or make a move.' Mr Ng says Hong Kong employers would probably take account of investment performance and the level of administration efficiency when reviewing their MPF providers. 'It has been a huge education exercise. A lot of companies and institutions had their own Occupational Retirement Scheme Ordinance (Orso) schemes so they knew to a certain extent what investment was about. They had a good appreciation of the types of funds, the pros and cons of the different asset allocations and providers. 'But this was all new to the large part of the Hong Kong population. There was a lot of effort put into teaching Mr Wong and Miss Chan the basics of investment: what it means to invest until you are 65, how to pick suitable funds for your investment profile.' One of the simple investment messages JF has helped to communicate is the investment horizon: the longer you have until the retirement age of 65, the more risk you can afford to take with your retirement money, which typically means a higher stocks component. Older fund members are generally advised to be more conservative. JF offers the usual range of Growth, Balanced, Guaranteed and Capital Preserved Funds and also a few high-risk single-country funds for aggressive MPF investors. Mr Ng says about 70 per cent of AIA-JF's MPF members had opted for the higher equity Lifestyle funds and about 30 per cent had chosen to be in the more conservative guaranteed and capital preserved vehicles. 'This high level of choice for Lifestyle funds was higher than we expected. It indicates people understood that MPF is for long-term investment to a greater extent than we originally thought. Most people are starting to get a basic appreciation of investment because of MPF.' Mr Ng says MPF members were asking their providers and fund managers how their investments were going. They were reading about negative returns and we are concerned about. 'We explain to them that if they have invested in a higher equity-weighted fund, the performance over the past two years has been down. But you need to compare what AIA-JF has achieved compared to the peer group of managers and essentially that is good. In terms of one-year and two-year numbers, we are top quartile.'