Information Centre

FAQ

On MPF Funds and Investment

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1. Do I have the right to choose the investment funds available under my MPF scheme?
Yes. You have the right to choose the constituent funds for both the employer and employee portions of the contributions. You can invest your contributions in one or more funds under the scheme according to your investment goals, personal risk tolerance level and future plans.

For example, a scheme member approaching retirement age may consider choosing fund(s) with lower risks, while a younger scheme member may consider more aggressive fund(s) with potentially higher investment returns.
2. After I have selected my initial investment portfolio, can I change my mind later?
You have the right to modify your investment portfolio. There may be a limit imposed by the governing rules of your scheme on the number of fund switchings you can make for free each year. Please contact your trustee for details.
3. How do I know if my contributions have started investing?

You may check your Annual Benefit Statements to ensure your contributions are invested in the funds you have chosen.


In addition, there are several layers of oversight built into the MPF System to ensure that trustees and investment managers are complying with the requirements of the MPF Schemes Ordinance:

 

  1. MPF trustees are required to closely monitor their appointed investment managers, and to file regular returns with MPFA;
  2. All investment managers must be properly licensed by and registered with the Securities and Futures Commission; and
  3. MPFA conducts regular on-site inspections to prevent non-compliance and educates employers and trustees about their obligations under the law.
4. From an investment perspective, is the risk of equity funds necessarily higher than bond funds?
In general, price fluctuations of stocks are on average higher than those of bonds over the long term, thus over a short period of time, investment risks of Equity Funds are generally higher than other types of funds, including Bond Funds. Nevertheless, when interest rates fluctuate significantly or the credit rating of the bond issuer is downgraded, the price of bond funds may also fluctuate as much as stock funds.
5. Why can’t an MPF Conservative Fund fully preserve my contribution capital?
An MPF Conservative Fund is a conservative investment in low-risk Hong Kong dollar assets, in order to earn a return similar to the interest rate of Hong Kong dollar bank savings deposits. Although the risk level of an MPF Conservative Fund is relatively low, the performance of the fund may be affected by interest rate fluctuations, thus the return may not catch up with inflation, or a negative return may even be recorded.
6. What is the difference between Index Funds and actively managed funds?

Index Funds are usually passively managed funds. Their investment objectives are to track the performance of the reference indices. Investment managers of these funds generally make investments with reference to the constituent stocks of the relevant index and market allocation, so that the performance of the fund is similar to that of the reference index.


For actively managed funds, investment managers have the discretion to adjust the portfolio mix of the funds, in compliance with the investment objectives and restrictions of the funds.

7. Why does the performance of Hang Seng Index tracking funds not follow the movement of the Hang Seng Index (HSI)?
Although the investment objective of HSI tracking funds is to match as closely as practicable the performance of the HSI, there can be no assurance that their performance will on each valuation day track or be identical to the HSI. Some of the reasons are set out below:

  • Fees and expenses are payable out of the assets of the HSI tracking funds, but the HSI does not reflect such fees and expenses;
  • Transaction fees and stamp duty will be incurred in adjusting the composition of the investment portfolio of the HSI tracking fund following changes in the composition and weighting of the constituent stocks of HSI;
  • When there are changes in the composition or weighting of the constituent stocks of the HSI, there may be timing differences between the changes in the HSI and the corresponding adjustment to the investment portfolio of the HSI fund; and
  • HSI tracking fund holds cash to meet the redemption/switching requirements of members, which leads to tracking errors.
8. Why does MPF offer only limited choices of investment products or funds with high investment risks?
There are stringent regulations and restrictions on the investment of MPF funds to strictly regulate the permitted investments of MPF funds, including restrictions on MPF funds to engage in higher risk activities such as borrowing and leveraged investments in order to minimize risks. Currently there are MPF funds in the market ranging from low to high risk levels for scheme members to choose, the major types of funds include Equity Funds, Mixed Assets Funds, Bond Funds, Guaranteed Funds, MPF Conservative Funds and Money Market Funds.
9. How can I safeguard my own MPF investments?

Before investing in any MPF fund, you should read carefully the Key Scheme Information Document, MPF Scheme Brochure and Fund Fact Sheet, understand thoroughly the fees, characteristics and risks of the funds in the scheme, and then choose the appropriate MPF fund and determine the proportion of investment according to your investment objectives, risk tolerance level and investment preference.

 

You should also actively manage your MPF account and investments, and read carefully the benefits statements and account information that the relevant MPF scheme trustee sends to you regularly.

If the investment market performed poorly when you reach the age of 65, you may consider keeping the accrued benefits in the MPF System for continuous investment, to suit your personal needs. You may then consider withdrawing your accrued benefits later, when the prices of MPF funds rise back. You can also decide the time, frequency and amount of your withdrawals.

On Fund Fees and Performance

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1. If no further contributions are made to an MPF account but management fees are still collected, will the balance drop to zero?
The management fee is deducted on a percentage basis rather than as a fixed fee, so it is impossible for this to reduce the balance of the account to zero. For the majority of MPF funds, management fees are deducted from the fund assets and will be reflected in the fund price.
2. Is there any measure to regulate the charging of fees on MPF Conservative Funds so as to ensure that funds will not be consumed by the fees charged?
The fee charging arrangement of MPF Conservative Funds is different from that of other MPF funds. The MPFA publishes a monthly Prescribed Savings Rate (PSR) based on the average interest rates offered by the three local note-issuing banks for a Hong Kong dollar savings account. Where the rate of return offered by an MPF Conservative Fund for a particular month is equal to or lower than the PSR, the trustee cannot charge any administrative fees. If the fund return exceeds the PSR in any month within the next 12 months, the trustee can collect the administrative fees that have not been charged.
3. Why has my trustee not been able to provide information regarding fees and expenses of the constituent funds in my account?

Generally speaking, there are two ways in which fees and expenses are deducted, namely:

 

  • deducting fees and expenses from the assets of the fund (Fund Level Deduction); and
  • deducting fees and expenses from the members' accounts by way of unit deduction (Member Level Deduction).

Currently, most MPF funds adopt the Fund Level Deduction method for deducting fees and expenses.

 

For Fund Level Deduction, the fees charged mainly comprise management fee and administrative expenses (such as investment management fee, trustee fee, custodian fee and scheme administration fee) charged on an annualized rate basis. The exact amount of administrative expenses levied entails calculation on the basis of the net asset value of the fund as a whole. As the expenses are deducted from the assets of the fund and not directly from individual scheme members' accounts, the exact amount payable by you is not available.

 

The fees and charges of a constituent fund are expressed in terms of Fund Expense Ratio, which is the expenses of an MPF fund as a percentage of the fund's asset value. Relevant information is published in the fund fact sheet issued by the trustee to scheme members, scheme members can also visit the Repository of Scheme Documents of MPFA’s website for fund fact sheets of different MPF schemes. Also, scheme members can visit the MPF Fund Platform for the Fund Expense Ratios of different MPF schemes.

 

In addition, the On-Going Cost Illustrations also helps scheme members understand the cost of the fund in actual amount. The On-Going Cost Illustration converts the latest fund expense ratio in dollar terms, then adds on any direct charges (for example contribution fees or offer spreads) that scheme members may need to pay, thus display the total amount of various fees, expenses and charges as a dollar figure. All trustees are required to calculate the On-Going Cost Illustrations based on a common set of assumptions and display them in a standardised way for scheme members to make comparisons conveniently.

 

On-Going Cost Illustrations provide: 

  • An illustration of the total effect of fees and charges on each fund contribution and investment of $1,000 in the next one, three and five years; and 
  • The fund expense ratio during the specified financial period. 

The On-Going Cost Illustrations must be distributed to prospective participating employers and prospective scheme members together with the Key Scheme Information Document and MPF Scheme Brochure.  Employers and scheme members who have participated in the scheme can also obtain relevant information from the trustee. In addition, scheme members can also visit the Repository of Scheme Documents on the MPFA website.

On Operation and Procedures

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1. Why have my MPF contributions been invested according to the Default Investment Strategy (DIS) by the trustee?
When you join an MPF scheme, you have to specify your investment mandate in the MPF scheme application/enrolment form and your trustee will invest your MPF contributions according to your instructions. If you have not given any investment instructions, your trustee will, according to the legislation, invest your contributions according to the DIS.
2. When will my trustee subscribe fund units for me after it receives my contributions?
Trustees will subscribe funds for scheme members only when the contributions are cleared by the bank and the trustees have completed the relevant administrative procedures (e.g. checking correctness of calculation of contributions).
3. I am an MPF scheme member, and I am also an investor in stocks. When selecting MPF schemes/funds and deciding if portfolio adjustment is required, I focus on short-term fund performance. Can I place several fund-switching orders on the same day to speculate on the price change of MPF funds?
Investing in funds is different from trading in stocks. Funds are traded on a “forward pricing” mechanism, i.e. the price of fund units can only be calculated after the close of market when the prices of underlying investments are available. Only one fund price is calculated for each dealing day, so it is impossible to speculate on the price change of MPF funds by placing several fund-switching orders in the same day.
4. Why does the switching of MPF funds sometimes take less than a day and sometimes take several days?
The time required to complete a request to switch between constituent funds (CFs) within a scheme may vary with the method of instruction used. In general, the processing time of fund-switching through trustees’ Interactive Voice Response System and the Internet is shorter than that through instructions given in paper form. 
 
Some CFs invest in approved pooled investment funds (APIFs) which are operated by different investment managers. Transactions between CFs and APIFs are processed on a cleared fund basis. Therefore, it takes time to redeem units from the APIF level to the CF level and re-allocate the subscription from the CF level to the APIF level. 
5. Why do trustees often take the lowest price to redeem and the highest price to subscribe when processing my fund-switching requests?
When the switching order is placed, the price of the fund is not known by the MPF trustee nor the scheme member. This is because funds are traded on a “forward pricing” mechanism, i.e. the price of fund units is calculated after the close of market when the prices of underlying investments are available. Moreover, during the course of completing all necessary administrative procedures for the trading of the fund units, the fund price may have gone up or down. 
6. Why am I not given the option to specify the date of redemption when I give a fund-switching instruction?

For most MPF schemes, a scheme member cannot specify a particular day to redeem his MPF funds as trustees need time to complete all administrative work and the process might involve external parties such that the definite processing time is unknown. Moreover, some constituent funds (CFs) invest in approved pooled investment funds (APIFs) which are operated by different investment managers. Transactions between CFs and APIFs are processed on a cleared fund basis. Therefore, it takes time to redeem units from the APIF level to the CF level and re-allocate the subscription from the CF level to the APIF level. 

7. Why does it take so long to complete a transfer request, and why is the transacted price different from what it was when I placed the transfer request?

After receiving a transfer request, the new trustee needs to verify the information submitted (and open an account for you if you do not have one with it) before sending the information to the original trustee for verification.


After verifying your information (e.g. notice of termination, if applicable), the original trustee will redeem the fund units in your account and transfer the assets to the new trustee. And the new trustee will follow your instructions, allocate the assets to the fund chosen by you. As funds are traded on a “forward pricing” mechanism, neither MPF trustees nor scheme members can know the trading price when placing a transfer request. Also, as it takes time to complete all necessary administrative procedures for the trading of the fund units, the fund price may have gone up or down.

8. Why is the amount of accrued benefits I received significantly lower than what was reported when I gave the instruction to withdraw said benefits?
It takes time for the trustee to verify your application (e.g. they need time to check the identity of the applicant and relevant documents which prove that the applicant fulfils the conditions for withdrawal) and complete the administrative procedures before the fund units are redeemed. As funds are traded on a “forward pricing” mechanism, neither MPF trustees nor scheme members can know the trading price when placing a withdrawal request. Also over the course of time, the market may have gone up or down and thus the final price of units redeemed may be higher, or lower, than it was at the time you made the withdrawal request. There may also be charges upon withdrawal of benefits. 
9. Would my MPF benefits be affected if my trustee goes bankrupt?
No. The assets of the MPF schemes under the trusteeship of the trustee are segregated from the assets of the trustee. Accordingly, in case an MPF trustee goes bankrupt, your assets and those of other scheme members will not be affected. 
10. Why can't my trustee provide real-time fund prices to me, like stock trading?

Trading in MPF funds is different from stock trading. Just like retail funds, MPF funds are traded on a “forward pricing” mechanism, i.e. the unit price of a fund can only be calculated after the close of market when the prices of underlying investments are available. 

Key Scheme Information Documents and MPF Scheme Brochures

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1. Where can scheme members find out more about the fees and charges of their MPF funds in the MPF Scheme Brochures?

Scheme member can find out more about the fees and charges of their MPF funds as follows:

 

  • The fee table shows the fees and charges of all constituent funds of an MPF scheme.
  • The on-going cost illustration converts the latest fund expense ratio figure into dollar terms, and add on any direct charges that a scheme member might pay (for example contribution fees or offer spread), thus display the total amount of various fees, expenses and charges in dollar terms.
  • Illustrative examples show the annual fees charged by an MPF Conservative Fund.
2. When will the Key Scheme Information Document and MPF Scheme Brochure be provided to scheme members?
The Key Scheme Information Document and MPF Scheme Brochure will be distributed together with an application form (e.g. enrolment form) to prospective scheme members upon their enrolment.
3. How can scheme members get a copy of the Key Scheme Information Document and MPF Scheme Brochure?
Scheme members can download the latest Key Scheme Information Documents and MPF Scheme Brochures from the MPFA website or obtain them from the respective trustees.

Fund Fact Sheets

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1. Why are only the top 10 portfolio holdings disclosed in the fund fact sheet?
The Code on Disclosure for MPF Investment Funds prescribes the minimum content of information to be disclosed in fund fact sheets, including the disclosure of the top 10 portfolio holdings of a constituent fund expressed as a percentage of a fund’s net asset value as at the reporting date of the fund fact sheet.
2. Why are the fund expense ratios of some constituent funds not provided in the respective fund fact sheets?
According to the Code on Disclosure for MPF Investment Funds, it is not necessary to show the fund expense ratio for a constituent fund if the period between the reporting date of the fund fact sheet and the inception date for the fund is less than two years.
3. Why are the fund expense ratios of different fund classes of the same constituent fund may be different?
Different fund classes of the same constituent fund may have different fee rates.
4. Why are the fund risk indicators of some constituent funds not provided in the fund fact sheets?
The fund risk indicator measures volatility of performance of a constituent fund based on its monthly rates of return over the previous three years. Constituent funds with a performance history of less than three years since inception to the reporting date of the fund fact sheet are not required to show a risk indicator.
5. When do scheme members receive the fund fact sheets?

Trustees are required by the MPF legislation to issue at least two fund fact sheets to scheme members for each financial year of a scheme. One of them must be provided within three months after the end of each financial period of the scheme. The other must be distributed within the seventh or eighth month after the end of the financial period of the scheme, by mail, or through the employer’s email, internet, fax or call centre. Scheme members may request fund fact sheets directly from the respective trustee or download them from the MPF Fund Platform or the Public Register on the MPFA website.

Scheme members should note that different schemes may have different financial periods, which end on different dates.

Annual Consolidated Report of an MPF Scheme

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1. What information can scheme members obtain in an annual consolidated report of an MPF scheme?

An annual consolidated report of an MPF scheme consists mainly of the following:

 

i.    Financial statements of an MPF scheme and its constituent funds – The financial statements give an overview of the financial position of the scheme and its constituent funds by showing the types of assets and liabilities held by the scheme and its individual constituent funds. They also provide an itemized list of various costs which have been debited from the scheme and its constituent funds, including but not limited to fees paid to the trustee, investment manager or other service providers for the financial period. A lot of information is covered in the notes to the financial statements. For example, transactions with related parties of the trustee and the investment managers are disclosed with a statement confirming that the transactions were entered into in the ordinary course of business and on normal commercial terms."
ii.    Scheme report – This provides scheme members with an overview of the financial development of an MPF scheme. For example, it includes (i) the particulars of changes made to the governing rules of the scheme; or (ii) the particulars of the appointment and termination of directors of the trustee during the financial period."
iii.    Investment report of an MPF scheme and its constituent funds – This is where scheme members can learn what assets the constituent funds hold and their market value. Scheme members can review commentary made by the trustee on analysis of investments held by the MPF scheme to determine how well each constituent fund has met its goals and investment strategies during the financial period.

 

The net annualized investment return tells scheme members about a constituent fund’s performance trend during the past 10 financial years (i.e. whether it was relatively steady or volatile). However, scheme members should note that past performance is not necessarily an indication of future results.
iv.    Auditor’s report – Scheme members can review the auditor’s opinion on whether the financial statements were properly prepared by the trustee in accordance with the relevant legislative requirements.

 

2. Which financial year of the MPF schemes’ annual consolidated reports are made available on the MPFA website?
The MPFA started to post the latest annual consolidated reports (for the year ended 31 December 2017 or later) of all MPF schemes from July 2018 onwards. They can be downloaded from the MPFA website. Scheme members can also obtain from their trustee the annual consolidated reports going back seven financial years preceding the date of the request.
3. Can scheme members compare the performance of constituent funds among different schemes by using the figures provided in the annual consolidated report of MPF schemes?

When scheme members compare the performance of constituent funds among different schemes using the figures provided in annual consolidated report of MPF schemes, they should note the financial periods of the MPF schemes. Different schemes may have different financial periods, which end on different dates.

 

To help scheme members carry out a cross comparison among the different constituent funds, the MPFA posts the performance data on the MPF Fund Platform on the MPFA website.

4. Why can’t the investment portfolios of the constituent funds disclosed in the annual consolidated report of an MPF scheme be reconciled with those presented in the fund fact sheets?
For constituent funds investing only in underlying funds (called a fund-of-fund arrangement), their investment portfolios disclosed in the annual consolidated reports show their holdings in each underlying fund, but not the securities held by the underlying funds. According to the Code on Disclosure for MPF Investment Funds, the fund fact sheet should disclose the top 10 portfolio holdings of a constituent fund down to the securities level if it has adopted the fund-of fund arrangement.
5. What is the role of the auditor of an MPF scheme in the annual consolidated report, and what is an auditor’s report?

It is a statutory requirement for an approved trustee to appoint an independent auditor for its MPF schemes. The approved trustee of an MPF scheme must ensure that the scheme’s financial statements for a financial period are audited by the independent auditor.


The auditor provides an independent opinion on whether the financial statements give a true and fair view of the financial position of the scheme as at the financial year end date, and its financial transactions and cash flows for the financial year. In addition, the auditor is required to assess whether the financial statements have been properly prepared in all material respects.

6. How should scheme members read the auditor’s report?

Scheme members should read the auditor’s report to see if the auditor expresses any qualified opinions.
If so, scheme members should read carefully why the auditor has issued the opinion.

The auditor will issue a qualified opinion if it believes that the financial statements do not give a true and fair view, or were not prepared in accordance with applicable accounting standards.

In a Volatile Market

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1. How can I manage my MPF investments in a volatile market?

You should bear in mind that MPF investments are long-term investments.  You should not be over-concerned about short-term market volatility if you are still some time from retirement. The only time that the price actually impacts on you is when you take the money out of the System either at retirement or upon early withdrawal under special circumstances allowed. Therefore you should think clearly about whether you really need to switch out of/into an MPF fund just because of the short-term price drop/rise of the MPF fund concerned.

 

Moreover, MPF investments, as a long term investment of 30-40 years, adopt the dollar cost averaging investment approach. Scheme members make a fixed amount of contribution to invest in an MPF fund on a regular basis regardless of the fund price. When the unit price goes up, fewer units are purchased; when the unit price drops, more units are purchased for the same amount. In the long run, by averaging out the costs of fund units over time, this approach reduces the effects of short-term market fluctuations on investments.

2. Is MPF investments completely risk-free?
Like other investments, MPF investment is not completely risk free. The performance of MPF investments will inevitably be affected if the investment market performs poorly. Nevertheless, the MPF system has strict investment regulations and restrictions which prohibit engaging in excessively high-risk investments in order to protect the MPF assets of scheme members in the long run.
3. How does the current regime regulate the underlying investments of MPF funds?
All MPF funds are required to comply with the stringent investment restrictions under the MPF legislation.  The use of high-risk structured products and leveraging is prohibited.  The total amount invested in securities and permissible investments issued by a single issuer must not exceed 10% of the total assets of an MPF fund.  The purpose is to achieve diversification in order to minimize risk.
4. How does MPFA monitor trustees of MPF schemes to ensure that scheme members’ interests are properly protected?

The MPFA imposes stringent entry and on-going eligibility requirements in terms of capital adequacy, professional competence, resources sufficiency, internal control and risk management systems on trustees, custodians and investment managers.

 

The MPFA adopts a proactive risk-based approach in monitoring the trustees' on-going compliance with rules and regulations through review of monthly, quarterly and yearly returns, audited financial statements and reports of the trustees. It also conducts periodic and special/thematic on-site inspections. The MPFA emphatically notes that trustees should have proper compliance monitoring systems in place to ensure their on-going compliance with the rules and regulations under the MPF regime.