Hong Kong’s older pension plans outperformed city’s Mandatory Provident Fund, says Mercer
Orso plans had better returns across all fund types in 2017 and over five-year period
Despite having a strong year, Hong Kong’s Mandatory Provident Fund underperformed when compared with pension plans set up before its launch, according to a report released on Wednesday by global consulting company Mercer.
These pension plans, set up before the MPF was established in 2000, come under a different regulation, the Occupational Retirement Schemes Ordinance (Orso).
The MPF, a compulsory retirement scheme, covers 2.8 million people, while 4,431 Orso plans cover 372,270 employees, according to government statistics. The Orso plans outperformed the MPF in all types of funds this year and over the past five years, according to Mercer.
“Generally, there is more flexibility in Orso investments than in MPF funds, and fund managers have more room to perform better,” said Billy Wong, the wealth business leader for Mercer in Hong Kong, China and Korea.
“For instance, there are more investment constraints on MPF funds, such as the percentage of Hong Kong dollar holdings and the limitation of usage of derivatives. The fees of Orso funds are also generally lower.”
While the best-performing Hong Kong and China equity funds under the MPF have a return of 40.4 per cent year to date, the same category under Orso has a return of 47.7 per cent. On a five-year basis, the MPF’s Hong Kong and China equity funds have a return of 9.8 per cent, below the 12.6 per cent under Orso.