On the surface, Manulife's retail Japanese Growth Fund and its MPF Japan Equity Fund look alike in more than just name. Both focus on similar sectors of the Japanese economy, and as of June eight of their top 10 holdings were identical. Unsurprisingly, their excellent three-year performance through to the end of August was nearly equal: a 72.83 per cent gain for the Japanese Growth Fund and a 72.23 per cent return for the MPF Japanese Equity Fund.
But when it comes to the fees associated with the funds, the similarities end. In an apparent example of the effects of competition, the Japanese Growth Fund, marketed to all retail investors, lists annual management and administrative fees of about 1.85 per cent (and the manager also receives a bonus when returns are particularly high). The Japanese Equity Fund, on the other hand, offered as part of Manulife's Mandatory Provident Fund scheme, has base fees of 2.25 per cent.
That difference is not slight. After 30 years, a fund with 2.25 per cent in annual fees could be expected to be worth more than 10 per cent less than one charging 1.85 per cent, assuming both otherwise had the same rate of return.
Manulife is by no means unique in charging different fees for its MPF clients than those on the open market.
For their part, providers maintain that some enrollees in their retirement schemes receive rebates that can reduce their fees by as much as half - although they do not offer figures on how common this practice is.
Indeed, until recently, providers seemingly did their best to hide the fee discrepancies altogether. Only in 2004, sparked in part by a Consumer Council report that found that 100 different terms were used to describe fees, did the Mandatory Provident Fund Authority (MPFA) hand down regulations requiring providers to offer much clearer statements of their charges. 'On-going cost illustrations' that explain how much of a typical HK$1,000 investment in a fund is devoured by fees are now being phased in, while the MPFA is also creating new rules to make personal fees more explicit in annual benefit statements.