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The Mandatory Provident Fund ("MPF") System as a whole recorded a net annualised dollar-weighted return of 6.99% over the five-year period from 1 April, 2001 to 31 March, 2006, says a report, "A Five-year Investment Performance Review of the MPF System", released today (July 7) by the Mandatory Provident Fund Schemes Authority (MPFA).
Speaking at a function organised by the Hong Kong Investment Funds Association today, Mr Darren McShane, MPFA's Executive Director (Regulation and Policy) said, "The report suggests that scheme members take a longer-term view when looking at their MPF investments. "
"The report also suggests that the MPF System, as a whole, should be able to add value to scheme members' contributions over a longer term, though the actual returns for MPF scheme members would vary on an individual basis."
Apart from examining the MPF System's investment performance, the report also analysed the performance of MPF funds by types calculated by way of time-weighted method. The six types of MPF funds are: equity funds, mixed assets funds, bond funds, guaranteed funds, money market funds and capital preservation funds.
All fund types showed positive returns, net of fees and charges, over the review period. Mixed assets funds and equity funds produced higher returns than all other fund types, registering annualised returns of 6.90% and 6.61% respectively.
At the other end of the scale were capital preservation funds and money market funds, which generated annualised returns of 0.86% and 0.60% respectively. In the middle were bond funds and guaranteed funds, which produced annualised returns of 3.06% and 1.26% respectively.
"The results of the review generally show a strong, and expected, relationship between risk and return; namely, the higher the risk, the higher the expected return in the long run. The report suggests that, among the six types of MPF funds, equity funds were most risky followed by mixed assets funds with capital preservation funds being the lowest risk funds," said Mr McShane.
"The tradeoff between return and risk shows the importance for scheme members to look at their own circumstances when making fund choices. Whether a scheme member should choose riskier funds to capture their potentially higher returns or the less risky funds for their security of capital would depend very much on an individual’s appetite for risk. Their appetite for risk would, in turn, be driven by personal circumstances, such as number of years to retirement, health, family circumstances and overall financial position, including personal savings and other investments.
"The review findings also suggest the need for members to monitor the performance of their MPF investments, keep track of the changing environment and adjust strategies in line with these developments, if necessary," he said.
As at 31 March, 2006, the aggregate net asset value of all MPF schemes was HK$164.61 billion, representing an increase of HK$28.17 billion over the net contributions made into the System.
The report, "A Five-year Investment Performance Review of the MPF System, 1 April, 2001 - 31 March, 2006", is available on the Authority's website http://www.mpfahk.org and Home Affairs Department's District Offices.
Ends/Friday, July 7, 2006
Issued at HKT 18:38
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