Mandatory Provident Fund (MPF)

Hong Kong’s MPF pension scheme posts 19pc return in first 11 months, on track for best year since 2009

China and Hong Kong equity funds are the biggest winners with almost 37pc returns, while money market funds are the worst performers

PUBLISHED : Monday, 04 December, 2017, 8:43pm
UPDATED : Monday, 04 December, 2017, 11:29pm

Hong Kong’s Mandatory Provident Fund, which covers 2.8 million employees and self-employed people in the city, has reaped a 19 per cent return for the first 11 months, making it on track to post its best yearly performance since 2009, according to data from fund research company Thomson Reuters Lipper.

The gains, said financial firm Convoy in a separate survey, meant that each Hong Kong employee would have earned about HK$35,102 (US$4,492).

The average performance of the 481 funds in the MPF however, still lost out to that of the Hang Seng Index, which has risen almost 32 per cent this year. This is because many of them were invested in money market or bond funds that dragged down the overall returns of all funds.

In November alone, the MPF recorded a modest growth of 1.26 per cent, the Lipper data showed.

Out of the US$100 billion in MPF assets, less than half, or 42 per cent, were invested in equity funds. Employees who invested in these funds were therefore, the bigger winners.

Lipper data showed that Greater China equity funds were the best performers with a return of 36.9 per cent in the first 11 months this year, with Hong Kong equity funds tailing behind at 36.41 per cent. Funds investing in Asia-Pacific, excluding Japan, equities ranked third at 33.56 per cent. They beat the Hang Seng Index’s performance.

None of the MPF funds reported losses for the 11 months. The worst performers were money market funds that invest only in bank deposits, and they accounted for a mere 0.5 per cent of all MPF assets. Hong Kong dollar market funds reported a 0.82 per cent gain and US dollar market funds had returns of 1.25 per cent.

Hong Kong’s MPF pension scheme poised for best year since 2009

Mixed asset funds that invest in stocks and bonds, the second most popular choice of funds among MPF members, reported an average return of 11.66 per cent during the 11-month period, Lipper said. They accounted for 37 per cent of all MPF assets.

Elvin Yu, the principal at pension consultancy firm Goji Consulting, said the global stock market rallies this year brought strong returns for the MPF.

“Looking ahead for next year, the MPF is likely to continue to perform well due to the strong stock market performance,” Yu said.

“The trend may change in the middle of next year when the Brexit negotiations of Britain leaving the European Union offer some details. In addition, the US interest rate rise may also start to have a negative impact on the investment market.”

The MPF last year delivered a 1.26 per cent return, reversing a loss of 3.1 per cent in 2015. In 2009, the fund posted a return of 25.89 per cent.