MPF Investment

Fund Types And Features

What is a bond fund?

A bond fund invests in bonds or debt instruments issued by governments, public organizations, banks, commercial organizations or supranational agencies (e.g. the World Bank). The acquired bonds must meet the credit rating or listing requirements stipulated in the MPF legislation.

Returns and risks

Returns are generated by recurrent interest earned from the underlying bonds and any profit earned from trading the bonds in the market.

Bond funds are generally considered to be a lower-risk investment. Bond prices, and thus fund prices and returns, may be affected by:

  • interest rates fluctuations – when interest rates rise, bond prices may drop and result in a drop in the fund price

  • exchange rates fluctuations – if the fund invests in bonds denominated in a foreign currency, the depreciation of that foreign currency may lead to a drop in the price of the fund
  • changes to credit ratings of a bond – if the fund invests in a bond whose credit rating is downgraded, the bond price will normally drop, which may lead to a drop in the price of the fund

For more information about the major types of MPF funds, please visit the thematic website on MPF investment education.