Most MPF funds yielded returns less than inflation: HKFTU

September 17, 2015 13:05
About 65% of the MPF funds have generated returns less than the local inflation rate over the past year, according to a survey. Photo: HKEJ

The investment return on 65 percent of the funds under the Mandatory Provident Fund System has lagged the inflation rate of 3.2 percent over the past year, according to the Hong Kong Federation of Trade Unions (HKFTU).

The Federation said a study of MPF schemes comprising 537 funds also revealed that expenses of the funds rose from HK$9.2 billion last year to HK$10 billion this year, Apple Daily reported.

The HKFTU criticized the funds for levying high fees while generating low returns for the contributors, and called for the setting up of a core fund that will provide a guaranteed return linked to the prevailing inflation rate.

Legislative Councilor Tang Ka-piu said funds' expenses varied from 0.13 percent to 3.92 percent of the investment amount, meaning that some were charging a fee 30 times higher than others.

About 45 percent of the funds surveyed have charged customers a fee higher than the average 1.62 percent, suggesting that the fund expenses are still relatively high.

Over the last decade, the average annual return of funds also differed substantially, ranging from a negative 0.51 percent to a gain of 13.06 percent, Tang added.

At least 60 percent of the funds have had exposure to equity investment.

Over the last 12 months, the best-forming MPF fund has produced a 25.3 percent return, while the worst performer returned a loss of 9.94 percent, although both were equity funds.

In response, the Mandatory Provident Fund Schemes Authority (MPFA) agreed that the lowering of fees was not substantial and fast enough.

The authority said it has hired a consultant to study the feasibility of setting up a centralized electronic platform for MPF contributors to manage their funds, which will be an important step to further liberate the MPF funds market and move towards full "MPF-portability".

The MPFA said the total assets of MPF funds totaled HK$620 billion as of June this year, with HK$165 billion being investment returns.

The average return of MPF funds over the last 15 years was 4.5 percent after expenses, which was higher than the average annual inflation rate of 1.8 percent, according to the agency.

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