Published by Asia Asset Management – 16th Nov 2018
The Mandatory Provident Fund (MPF), Hong Kong’s largest public retirement plan, has posted an average annual return of 4.1% since it was set up 18 years ago, according to latest data from the fund’s supervisory body.
The Mandatory Provident Fund Schemes Authority (MPFA) is also urging members to stay “calm and rational” and not be overly worried about the recent stock market volatility, pointing out that they are investing for the long term.
The MPF had total assets of HK$858.3 billion (US$110 billion) as of September 2018, up from HK$792.8 billion last year. About one-third of the assets, or HK$245.2 billion, was net investment returns, the MPFA says in a statement on November 14.
The fund’s average net return since its inception in December 2000 was 4.1% per annum, down from 4.4% in 2017, compared to the city’s annualised inflation rate of 1.8% over the same period.
According to a Hong Kong-based fund analyst, the MPF’s return is “within an acceptable range” because it includes low-return conservative funds.
“However, MPF is only part of the retirement protection for Hong Kong people. It’s more important for them to know how to rationally invest to protect their (retirement) savings against inflation,” the analyst tells Asia Asset Management, speaking on condition of anonymity.
MPF members can invest in six types of funds, including equity and bond funds.
Equity funds recorded the highest annualised return of 5% since 2000, followed by mixed assets funds, with 4.3%, and bond funds, 2.5%, the MPFA says.
But the other three fund types failed to beat the inflation rate. Guaranteed funds returned 1.1%, MPF conservative funds – a type of money market fund specifically for members who have low risk tolerance – posted a return of 0.7%, and money market funds had a return of 0.5%.
The MPFA acknowledges that the recent volatility of the Hong Kong and global stock markets has made some plan members jittery about their investments.
“However, scheme members should note that the MPF is a 30- to 40-year investment, and the investment returns of their MPF will inevitably be affected by financial market cycles,” a spokesperson for the MPFA says in the statement.
The spokesperson, who isn’t named, advises members to “remain calm and rational in the face of volatility” and consider factors such as risk tolerance and their particular life stage when deciding on asset allocation, instead of trying to time the market.
