Too many people are ignoring their Mandatory Provident Fund investments, or merely treating them as a stock market index instead of actively managing their retirement plans, says one of the firms welcoming the employee-choice initiative. Bank Consortium Trust Company (BCT) likes to see more MPF contributors take an active role in managing their fund. 'People need to spend a little time to research their MPF investments in the same way they would if they were buying an apartment. They need to look at planning for their retirement in a more proactive way,' says Lau Ka-shi, BCT's managing director and CEO. Lau says most of her company's MPF members have never switched funds or rebalanced their portfolios since enrolment. BCT research revealed that only about 10 per cent of contributors spend time checking their MPF statements. It also found that members who do switch funds often try to chase the market and switch to equity funds when bull markets are at peak levels. Frequent switching may also result in buying high and selling low. 'Even professional fund managers struggle to time the market correctly about 50 per cent of the time,' Lau says. Instead of ignoring their MPF statements altogether, or treating the scheme as a stock market index, contributors should take a long-term view and look for fund strategies that match risk appetite and retirement objectives. Their strategy should be to examine the structure of funds, such as the percentage invested in bonds, equities and cash, and the markets where funds are invested. Lau says contributors should not only look at management costs, but also at performance over a sustained period. 'Management costs do not always equate to performance. A fund that charges a quarter of a per cent more than a similar fund, but generates attractive returns, is likely to be a better investment than a fund that charges fewer management fees but doesn't perform so well,' she says. Since the launch of the MPF scheme nearly 10 years ago, BCT has used independent multifund managers to provide wider choices and investment perspectives. With increasing assets under management and larger economies of scale, the company was the first MPF provider to take the lead in fee reduction for its Capital Preservation Fund in the form of a bonus units rebate. BCT also launched its China and Hong Kong Equity Fund, and its European Equity Fund at lower management fees than comparable funds. The firm offers choices from a suite of 20 funds, broadly covering the investment spectrum allowed under the MPF Schemes Ordinance. It includes life-cycle SaveEasy Funds, which are adjusted by fund managers to provide a greater measure of stability and less exposure to risk and volatility as the contributors move closer to retirement age. 'I like to think our MPF offerings are like a dim sum restaurant - there is a wide choice available to suit different appetites,' Lau says. Defining funds by their equity component is another way that members can compare performance with like-for-like funds. For instance, BCT's E50 Mixed Asset Fund denotes 50 per cent investment in global equities and 50 per cent in global fixed-income securities. 'Clear labelling allows contributors to quickly see how the fund is structured instead of simply naming it a balanced fund, which in some cases could mean anything from 30 per cent to 70 per cent invested in equities,' Lau says. BCT has established channels to provide information on retirement planning. Its Rainbow Retirement website not only provides investment information, but also health care, lifestyle and social information compiled by independent contributors. BCT also conducts MPF awareness visits at the invitation of employers. Information centres, presentations and seminars have also been organised. 'When we organised workshops in the early days, it was very disappointing and only a handful of people would turn up, but these days, we usually find more than 100 people participating,' Lau says. She believes the MPF sector will become more dynamic and encourage contributor participation when the employee-choice arrangement is introduced later this year. The initiative has been designed to give employees greater control over their MPF savings and to promote greater market competition. While employers and employees are presently mandated to contribute 5 per cent of monthly earnings, capped at HK$20,000, to the MPF, it is the employer, not the contributor, who chooses the MPF product provider. By introducing employee-choice, Lau expects to see an increase in competition among providers, with the expectation that providers will need to differentiate their products and offer incentives, such as competitive fees and enhanced services, to attract and retain members. In addition, providing contributors with more control over their savings should encourage them to be more engaged and make decisions about their provider, product and investment strategies. 'Employee-choice should mean a deepening and widening of services directly to members instead of business-to-business. It could even mean that about two-thirds of the entire MPF fund will become portable as members choose which providers they want to invest with,' Lau says. Finding ways to communicate with members when portability comes is another challenge Lau says providers will face.