Information Centre

The performance of MPF funds has always been an important matter to scheme members, as it has a direct impact on the retirement savings they accumulate over time. Different types of funds have different rates of return. Occasionally, there are opinions suggesting that the returns of Conservative Funds were unable to keep up with inflation, but is this really the case? Let’s have a better understanding of the characteristics of Conservative Funds.

There are five major types of MPF Funds, namely equity funds, mixed assets funds, bond funds, guaranteed funds and conservative funds. Each of these fund types has its unique investment objectives and risk levels. An MPF conservative fund is a type of money market fund, which is generally invested in Hong Kong-dollar assets, either short-term bank deposits or short-term bonds. Since the investment risk is relatively low, the expected return is also relatively low, with the target of earning a return similar to the Hong Kong dollar savings rate. MPF equity funds, bond funds and mixed assets funds are invested in stocks and/or bonds, so their expected returns in the long run are more likely to beat inflation, but they certainly bear a higher investment risk.

The persistent low interest rate environment in recent years has a material impact on long-term investments. Inflation will eat into the retirement savings if they are not properly invested. Young scheme members who have a longer investment horizon to mitigate the impact of short-term market volatility may opt for more aggressive, higher-risk funds to generate higher returns. Scheme members approaching retirement age, however, should reduce their investment risk gradually to secure their MPF assets accumulated over the years. Members should take into consideration factors such as different stages of life, investment goals and risk-tolerance level when making investment decisions.

Scheme members who lack the time or knowledge to manage their MPF may consider using the Default Investment Strategy (DIS), which features “automatic de-risking”, a fee cap and a globally diversified investment approach, thus facilitating their retirement planning at ease.