Information Centre

You may check your Annual Benefit Statements to ensure your contributions are invested in the funds you have chosen.

In addition, there are several layers of oversight built into the MPF System to ensure that trustees and investment managers are complying with the requirements of the MPF Schemes Ordinance:

1. MPF trustees are required to closely monitor their appointed investment managers, and to file regular returns with MPFA;
2. All investment managers must be properly licensed by and registered with the Securities and Futures Commission; and
3. MPFA conducts regular on-site inspections to prevent non-compliance and educates employers and trustees about their obligations under the law.

Index Funds are usually passively managed funds. Their investment objectives are to track the performance of the reference indices. Investment managers of these funds generally make investments with reference to the constituent stocks of the relevant index and market allocation, so that the performance of the fund is similar to that of the reference index.

For actively managed funds, investment managers have the discretion to adjust the portfolio mix of the funds, in compliance with the investment objectives and restrictions of the funds.

• Fees and expenses are payable out of the assets of the HSI tracking funds, but the HSI does not reflect such fees and expenses;
• Transaction fees and stamp duty will be incurred in adjusting the composition of the investment portfolio of the HSI tracking fund following changes in the composition and weighting of the constituent stocks of HSI;
• When there are changes in the composition or weighting of the constituent stocks of the HSI, there may be timing differences between the changes in the HSI and the corresponding adjustment to the investment portfolio of the HSI fund; and
• HSI tracking fund holds cash to meet the redemption/switching requirements of members, which leads to tracking errors.

Before investing in any MPF fund, you should read carefully the Key Scheme Information Document, MPF Scheme Brochure and Fund Fact Sheet, understand thoroughly the fees, characteristics and risks of the funds in the scheme, and then choose the appropriate MPF fund and determine the proportion of investment according to your investment objectives, risk tolerance level and investment preference.

You should also actively manage your MPF account and investments, and read carefully the benefits statements and account information that the relevant MPF scheme trustee sends to you regularly.

If the investment market performed poorly when you reach the age of 65, you may consider keeping the accrued benefits in the MPF System for continuous investment, to suit your personal needs. You may then consider withdrawing your accrued benefits later, when the prices of MPF funds rise back. You can also decide the time, frequency and amount of your withdrawals.

MPF funds deduct fees and expenses from the assets of the fund. The fees charged mainly comprise management fee and administrative expenses (such as investment management fee, trustee fee, custodian fee and scheme administration fee) charged on an annualized rate basis. The exact amount of administrative expenses levied entails calculation on the basis of the net asset value of the fund as a whole. As the expenses are deducted from the assets of the fund and not directly from individual scheme members' accounts, the exact amount payable by you is not available.

The fees and charges of a constituent fund are expressed in terms of Fund Expense Ratio, which is the expenses of an MPF fund as a percentage of the fund's asset value. Relevant information is published in the fund fact sheet issued by the trustee to scheme members, scheme members can also visit the Repository of Scheme Documents of MPFA’s website for fund fact sheets of different MPF schemes. Also, scheme members can visit the MPF Fund Platform for the Fund Expense Ratios of different MPF schemes.

In addition, the On-Going Cost Illustrations also helps scheme members understand the cost of the fund in actual amount. The On-Going Cost Illustration converts the latest fund expense ratio in dollar terms, then adds on any direct charges (for example contribution fees or offer spreads) that scheme members may need to pay, thus display the total amount of various fees, expenses and charges as a dollar figure. All trustees are required to calculate the On-Going Cost Illustrations based on a common set of assumptions and display them in a standardised way for scheme members to make comparisons conveniently.

On-Going Cost Illustrations provide: 

• An illustration of the total effect of fees and charges on each fund contribution and investment of $1,000 in the next one, three and five years; and 
• The fund expense ratio during the specified financial period. 
  
  

For most MPF schemes, a scheme member cannot specify a particular day to redeem his MPF funds as trustees need time to complete all administrative work and the process might involve external parties such that the definite processing time is unknown. Moreover, some constituent funds (CFs) invest in approved pooled investment funds (APIFs) which are operated by different investment managers. Transactions between CFs and APIFs are processed on a cleared fund basis. Therefore, it takes time to redeem units from the APIF level to the CF level and re-allocate the subscription from the CF level to the APIF level. 

After receiving a transfer request, the new trustee needs to verify the information submitted (and open an account for you if you do not have one with it) before sending the information to the original trustee for verification.

After verifying your information (e.g. notice of termination, if applicable), the original trustee will redeem the fund units in your account and transfer the assets to the new trustee. And the new trustee will follow your instructions, allocate the assets to the fund chosen by you. As funds are traded on a “forward pricing” mechanism, neither MPF trustees nor scheme members can know the trading price when placing a transfer request. Also, as it takes time to complete all necessary administrative procedures for the trading of the fund units, the fund price may have gone up or down.

Trading in MPF funds is different from stock trading. Just like retail funds, MPF funds are traded on a “forward pricing” mechanism, i.e. the unit price of a fund can only be calculated after the close of market when the prices of underlying investments are available. 

Scheme member can find out more about the fees and charges of their MPF funds as follows:

• The fee table shows the fees and charges of all constituent funds of an MPF scheme.
• The on-going cost illustration converts the latest fund expense ratio figure into dollar terms, and add on any direct charges that a scheme member might pay (for example contribution fees or offer spread), thus display the total amount of various fees, expenses and charges in dollar terms.
• Illustrative examples show the annual fees charged by an MPF Conservative Fund.

Trustees are required by the MPF legislation to issue at least two fund fact sheets to scheme members for each financial year of a scheme. One of them must be provided within three months after the end of each financial period of the scheme. The other must be distributed within the seventh or eighth month after the end of the financial period of the scheme, by mail, or through the employer’s email, internet, fax or call centre. Scheme members may request fund fact sheets directly from the respective trustee or download them from the MPF Fund Platform or the Public Register on the MPFA website.

Scheme members should note that different schemes may have different financial periods, which end on different dates.

An annual consolidated report of an MPF scheme consists mainly of the following:

i.    Financial statements of an MPF scheme and its constituent funds – The financial statements give an overview of the financial position of the scheme and its constituent funds by showing the types of assets and liabilities held by the scheme and its individual constituent funds. They also provide an itemized list of various costs which have been debited from the scheme and its constituent funds, including but not limited to fees paid to the trustee, investment manager or other service providers for the financial period. A lot of information is covered in the notes to the financial statements. For example, transactions with related parties of the trustee and the investment managers are disclosed with a statement confirming that the transactions were entered into in the ordinary course of business and on normal commercial terms."
ii.    Scheme report – This provides scheme members with an overview of the financial development of an MPF scheme. For example, it includes (i) the particulars of changes made to the governing rules of the scheme; or (ii) the particulars of the appointment and termination of directors of the trustee during the financial period."
iii.    Investment report of an MPF scheme and its constituent funds – This is where scheme members can learn what assets the constituent funds hold and their market value. Scheme members can review commentary made by the trustee on analysis of investments held by the MPF scheme to determine how well each constituent fund has met its goals and investment strategies during the financial period.

The net annualized investment return tells scheme members about a constituent fund’s performance trend during the past 10 financial years (i.e. whether it was relatively steady or volatile). However, scheme members should note that past performance is not necessarily an indication of future results.
iv.    Auditor’s report – Scheme members can review the auditor’s opinion on whether the financial statements were properly prepared by the trustee in accordance with the relevant legislative requirements.

When scheme members compare the performance of constituent funds among different schemes using the figures provided in annual consolidated report of MPF schemes, they should note the financial periods of the MPF schemes. Different schemes may have different financial periods, which end on different dates.

To help scheme members carry out a cross comparison among the different constituent funds, the MPFA posts the performance data on the MPF Fund Platform on the MPFA website.

It is a statutory requirement for an approved trustee to appoint an independent auditor for its MPF schemes. The approved trustee of an MPF scheme must ensure that the scheme’s financial statements for a financial period are audited by the independent auditor.

The auditor provides an independent opinion on whether the financial statements give a true and fair view of the financial position of the scheme as at the financial year end date, and its financial transactions and cash flows for the financial year. In addition, the auditor is required to assess whether the financial statements have been properly prepared in all material respects.

Scheme members should read the auditor’s report to see if the auditor expresses any qualified opinions.
If so, scheme members should read carefully why the auditor has issued the opinion.

The auditor will issue a qualified opinion if it believes that the financial statements do not give a true and fair view, or were not prepared in accordance with applicable accounting standards.

You should bear in mind that MPF investments are long-term investments.  You should not be over-concerned about short-term market volatility if you are still some time from retirement. The only time that the price actually impacts on you is when you take the money out of the System either at retirement or upon early withdrawal under special circumstances allowed. Therefore you should think clearly about whether you really need to switch out of/into an MPF fund just because of the short-term price drop/rise of the MPF fund concerned.

Moreover, MPF investments, as a long term investment of 30-40 years, adopt the dollar cost averaging investment approach. Scheme members make a fixed amount of contribution to invest in an MPF fund on a regular basis regardless of the fund price. When the unit price goes up, fewer units are purchased; when the unit price drops, more units are purchased for the same amount. In the long run, by averaging out the costs of fund units over time, this approach reduces the effects of short-term market fluctuations on investments.

The MPFA imposes stringent entry and on-going eligibility requirements in terms of capital adequacy, professional competence, resources sufficiency, internal control and risk management systems on trustees, custodians and investment managers.

The MPFA adopts a proactive risk-based approach in monitoring the trustees' on-going compliance with rules and regulations through review of monthly, quarterly and yearly returns, audited financial statements and reports of the trustees. It also conducts periodic and special/thematic on-site inspections. The MPFA emphatically notes that trustees should have proper compliance monitoring systems in place to ensure their on-going compliance with the rules and regulations under the MPF regime.

The common ESG investment strategies adopted by ESG funds are:

Best in class/positive screening

Investing in companies or sectors that have comparatively better ESG performance based on a set of ESG characteristics

Impact investing

Investing in companies with an aim to generate measureable positive ESG impact

Thematic

Investing in companies that engage in specific ESG themes (e.g. renewable energy)