Hong Kong’s Mandatory Provident Fund members shouldn’t be too concerned about short-term market fluctuations and rush to switch funds, but should review their portfolios regularly, says Ayesha Macpherson Lau, head of the MPF industry’s supervisor.
Figures from investment consultancy MPF Ratings show that Hong Kong’s largest public retirement scheme incurred HK$213.7 billion (US$27.34 billion) of investment losses from January through November as markets were roiled by rising inflation and global geopolitical tensions.
“The short-term performance of MPF does not represent MPF performance over the whole investment period of scheme members,” Lau writes in a blog post on November 27. “[They] should not be overly concerned with market fluctuations.”
The post was published on the website of the Mandatory Provident Fund Schemes Authority (MPFA) which she chairs.
Lau cautions MPF members about switching funds after sharp market declines, pointing out that this can easily lead to a situation of “buying high, selling low” and turn short-term fluctuations into actual losses.
There are now 421 MPF funds under 13 MPF trustees available to members.
Lau lists what she says are the MPF system’s three key advantages: dollar-cost averaging, diversified investments, and a default investment strategy (DIS).
The DIS automatically channels contributions from MPF members who do not provide investment instructions into two constituent funds. Lau says the strategy can reduce risk, especially for those unfamiliar with investing.
She reminds MPF members to review their portfolios constantly and to take into account factors such as risk tolerance when making investment allocations.
“They should also bear in mind that investment diversification can effectively reduce investment risk compared to concentrating their investment in a single market or asset type,” she writes.
The MPF had HK$1.06 trillion of assets and more than 4.5 million members as of June 2022.