Many Hongkongers have been grumbling about the high costs and low returns of their 15-year-old mandatory pension scheme, and its latest financial results offer little reason to feel otherwise.
The Mandatory Provident Fund, as a whole, lost about HK$51 billion (US$6.57 billion) for the year to March 31, an annual loss of 8.2 percent.
This was the worst year since the global financial crisis in 2008-09.
While the MPF fees are undoubtedly expensive and have ample room to come down, whether the performance of the funds is good or bad is harder to conclude.
The history of yearly returns shows clearly the inevitable impact of the macro environment at those times.
Take 2002 and 2003 for example. Losses were recorded in both years, first because of the lingering impact from the bursting of the tech bubble and then the outbreak of severe acute respiratory syndrome.
The results for 2009 were the worst. The MPF funds lost 25.9 percent in the wake of the global financial tsunami.
Nevertheless, the funds are hardly uniform.
They include a wide variety of different fund choices, from asset types including equities and bonds or a mix of the two.
The only way to assess whether they outperform or underperform is to first decide on a set of commonly accepted benchmarks for each type of fund and then measure the funds’ results against them.
This article appeared in the Hong Kong Economic Journal on May 21.
Translation by Raymond Tsoi
[Chinese version 中文版]
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