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Overview of MPF Fund Types

 

1. MPF Conservative Fund

 

Objective: Earn a rate of return similar to the Hong Kong Dollar savings rate.

Instruments: Short-term bank deposits and short-term bonds.

Risks: Low - fluctuation interest rates.

Fees: Administrative fees cannot be charged by trustees if the rate of return in a particular month is lower than or equal to MPFA’s Prescribed Savings Rate for that month.

Features

  • The law requires that each MPF scheme offers at a minimum an MPF Conservative Fund.
  • Low-risk but returns may not beat inflation and may even be negative.
  • Generally described as a Money Market Fund in the Fund Fact Sheet issued by trustees.

Suitable for: Conservative, risk averse scheme members, especially those close to retirement.

 

2. Money Market Fund or Cash Fund

 

Objective: Earn a rate of return higher than bank deposits or short-term certificates of deposit.

Instruments: Short-term interest bearing money market instruments e.g. short-term bank deposits, government bills or commercial papers.

Risks: Low - fluctuation in interest rates and exchange rates.

Fees: Generally charged as a percentage of the fund's net asset value.

Features: Relatively stable. This type of fund can be used to manage cash that is not currently invested, while earning income generated through interest.

Suitable for: People who are close to retirement, or low-risk bearers.

 

3. Guaranteed Fund

 

Objective: Guarantee on capital invested, or guaranteed rate of return.

Instruments: Bonds, stocks or short-term, interest- bearing, money market instruments.

Risks: Low - the guaranteed rate of return may be modified with prior notice; credit risk of related insurance company (if holding an insurance policy); guarantor risk.

Fees: The guarantor usually charges a guarantee fee or reserve fee, in addition to the basic fees and charges typical of other MPF funds.

Features

  • Two major types of guarantee: capital guarantee or return guarantee.
  • To qualify for the guarantee, all guarantee conditions such as minimum investment period and withdrawal requirements must be met. 
  • Scheme members must read the terms and conditions of individual funds carefully.

Suitable for: Risk averse scheme members, especially those close to retirement who are willing to abide by the guarantee conditions.

 

4. Bond Fund or Fixed Income Fund

 

Objective: Earn a stable income from interest and the bond coupon rate. Make profits from bond trading.

Instrument: Bonds.

Risks: Low to medium - fluctuation in interest rates, exchange rates and bond credit ratings.

Fees: Generally charged as a percentage of the fund’s net asset value.

Features: The bonds must meet the minimum credit rating or listing requirements prescribed by MPFA.

Suitable for: Moderately conservative scheme members with a low risk appetite, and those seeking a stable return over the medium-to-long term.

 

5. Mixed Assets Fund

 

Objective: Achieve capital appreciation over the long term. Invest in a combination of stocks and bonds.

Instruments: Stocks and bonds.

Risks: Medium to high - stock market volatility, interest rate fluctuation, exchange rate fluctuation, and bond credit ratings.

Fees: Generally charged as a percentage of the fund’s net asset value.

Features

  • Different Mixed Assets Funds have different proportions of stocks and bonds.
  • In general, a greater proportion of stocks is associated with higher risk. 
  • Scheme members may adjust the proportion of stocks to bonds in their portfolios at different life stages.

Suitable for: Any stage of life.

 

6. Equity Fund

 

Objective: Achieve capital appreciation and a return higher than inflation over the long term.

Instrument: Stocks.

Risks: High - stock market volatility, exchange rate fluctuation and the overall condition of listed companies.

Fees: Generally charged as a percentage of the fund’s net asset value.

Features:

  • Usually three types of Equity Funds: single market, regional market or global market.
  • Invest mainly in stocks listed on stock exchanges approved by MPFA.

Suitable for: Young scheme members with a longer investment horizon and a higher risk tolerance level, and other risk tolerant scheme members.

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