White Collar | MPF core fund should have only one operator
This will give the new investment option the scale to enable the cap on fees to be cut further

With the Mandatory Provident Fund Schemes Authority gaining public support for a low-fee "core fund", the next step is to make it work. And that means there should be only one operator of the fund.
Getting the structure of the core fund right is crucial to its success. The provision of a single such fund will give the new investment option the scale required to enable the cap on fees to be reduced even further from the proposed 0.75 per cent.
After all, the push for a low-fee core fund stems from long-standing complaints over the high fees and poor performance at MPF schemes. On the latter, the stock and bond markets may have a greater say on the returns achieved. But the high fees that have riled the critics are partly owing to a flawed structure of the MPF programme that has resulted in too many providers offering too many schemes with myriad investment choices.
Introduced in 2000, the MPF programme has 41 schemes run by 19 providers with 450 investment funds on offer.
The upshot is that 600,000 of the city's 2.5 million employees have failed to make any investment choices, allowing their MPF provider to put their money into default funds that often come with high fees and, typically, low returns. Now the MPFA's reform will require all providers to offer a core fund to replace the default funds. The industry average for MPF fees is 1.69 per cent. Along with the proposed cap on fees of 0.75 per cent, the core funds will be restricted to a simple investment strategy: index tracking.
The MPFA will now need to work with the providers on how to set up this fund. Two possibilities arise: each of the 19 providers can establish its own core fund for the 41 schemes or a single provider is approved for scheme, with the other providers acting as distributors.