Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) has added three more investment options to the city’s largest retirement savings plan, including China funds and environmental, social and governance funds.
The MPFA, which supervises the Mandatory Provident Fund industry, made the move in one of its regular adjustments of benchmarks for new fund approvals.
The latest adjustment includes eligible China A-share funds, single-country funds, and special funds such as those with ESG themes.
“The MPF fund pool will have to be more diversified in response to the fast-growing ageing population in Hong Kong and the increasingly volatile financial market,” Cheng Yan-chee, managing director of MPFA, told reporters at a press conference on November 17, when the adjustment was made.
He says single-country funds will be limited to those investing in the US, China and Japan, the world’s top three by market capitalisaton.
As for ESG funds, the MPFA will assess their feasibility by comparing their counterparts in Asia Pacific in terms of underlying assets and performances.
The industry supervisor will not allow funds that have similar investment themes as existing products, or those with higher management fees.
“The applicants will need to prove that their new funds are able to bolster the diversity of their investment choices and meet their members’ risk tolerance and investment expectation,” Cheng says.
There are currently 27 MPF schemes comprising 412 funds under the 13 registered MPF trustees.
Cheng expects more inflation-linked funds to come into the market given rising global inflation risks.
The MPFA has also been pressing ahead in recent years with diversifying the investment scope of the MPF. Last year, it allowed MPF funds to invest in bonds issued by China’s central bank and policy banks. In 2020, it allowed the funds to invest in real estate investment trusts.
Cheng says the MPFA will consider factors such as risk control and the risk tolerance of members in the course of expanding the scope of investment of the MPF.
The MPF had HK$1.06 trillion (US$135.8 billion) of total assets and over 4.5 million members as of June 2022.