China, Hong Kong equity MPF funds outperform peers, says MPF Ratings

16 August 2017   Category: News, Asia, Global, Hong Kong   By Asia Asset Management

Equity funds dedicated to Hong Kong and China were the best performing Mandatory Provident Fund (MPF) category in July and through the first seven months of 2017 amid the local stock market rally, according to pension research provider MPF Ratings (MPFR).

These 69 fund classes collectively posted an average monthly return of 6.09% in July, compared to their five- and ten-year returns of 8.11% and 2.66%, respectively, MPFR says in its latest monthly MPF performance survey.

They were the best performers among all MPF schemes in July, and also topped their peers in the January-July period with a return of 26.27%, according to the survey released on August 11.

Angie Lo, research manager of MPFR, attributes the seven-month returns of the equity funds dedicated to Hong Kong and China to the “Trump Effect”, referring to the impact on markets of US President Donald Trump’s election victory late last year.

The benchmark Hang Seng Index gained 24.2% in the first seven months of the year, versus a five-year return of 6.66%, and a ten-year return of 1.66%, the survey notes.

The Hong Kong and China funds’ performance in July, meanwhile, was driven by the US Federal Reserve’s decision to leave interest rates unchanged at its meeting last month, Ms. Lo says in a written reply to questions from Asia Asset Management.

The Hang Seng Index gained 6.09% in July.

MPFR notes that its indices of all asset classes produced positive returns last month.

“July saw some of the most consistent performance amongst funds since introduction of MPF [in March 2000]. The monthly dispersion of returns of equity fund (Asia) and mixed asset fund categories in July was one of the smallest on record,” the research provider says.

However, it points out that only 29% of all MPF funds with a top quartile one-month return in July are also in the top quartile for ten-year annualised returns. Furthermore, it adds, 29% of all MPF funds, which are in the bottom quartile one-month return in July, would be in the top quartile if they were measured on a ten-year annualised return basis.  

Therefore, “short-term performance does not dictate long-term returns,” the research provider says.

MPFR has run the monthly surveys since December 2009 to track the performance of Hong Kong MPF funds on a rolling basis.

The MPF, a compulsory retirement scheme for Hong Kong employees, had total AUM of HK$701.17 billion (US$89.64 billion) as at March 2017.