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MPFA Chairman Mrs Ayesha Macpherson Lau today (27 March) published a blog post, pointing out that the Default Investment Strategy (DIS) was launched five years ago and has gradually developed into a considerable scale. As at the end of December 2021, the total assets invested in the DIS amounted to $86.7 billion.  Among a total of 10 million MPF accounts, 2.6 million of them, equivalent to one in every four accounts, had invested their assets either according to the DIS or in the two constituent funds under the DIS.

With respect to age, the number of MPF accounts investing according to the DIS was higher among younger scheme members, with 32% held by those aged 29 and below. 22% and 18% were held by scheme members aged 30 to 39 and 40 to 49 respectively; while 18% and 10% were held by those aged 50 to 59 and 60 and above respectively.

Mrs Lau mentioned that the DIS is a convenient, ready-made investment solution, which has been well received by MPF scheme members. From the perspective of investment return, as at the end of 2021, the Core Accumulation Fund¹ and Age 65 Plus Fund² under the DIS had achieved net annualized returns of 8.7% and 4.5% on average respectively since its launch in April 2017. They were both higher than the annualized inflation rate of 1.8% over the same period. The net cumulative returns of the two funds were 50% and 25% respectively.

Mrs Lau pointed out that MPF returns are influenced by fee levels. DIS funds are subject to fee caps.  Management fees must not exceed 0.75% of the net asset value of the fund per annum and recurrent out-of-pocket expenses must not exceed 0.2% of the net asset value of the fund per annum. As stipulated in the Mandatory Provident Fund Schemes (Amendment) Bill 2021 passed by the Legislative Council in October 2021, the out-of-pocket expenses cap for DIS funds will be lowered from 0.2% to 0.1% after the migration of MPF trustees and schemes to the eMPF Platform.

From the perspective of risk management, the “automatic de-risking” feature of the DIS reduces the exposure to investment risk as a scheme member approaches retirement age by automatically adjusting the proportion of assets invested in equities and bonds every year according to the scheme member’s age. This is suitable for long-term retirement investment savings. The assets of DIS funds are invested in global equity and bond markets for risk diversification across geographical regions and asset classes.

Regarding some scheme members’ concerns about the impact of the pandemic and the economy on their MPF investments, Mrs Lau reiterated that the MPF is a long-term investment spanning decades. Scheme members should stay calm in the face of market volatility and not try to time the market lest unnecessary losses be incurred.

For the full version of the article, please visit the MPFA blog. The blog is in Chinese only.

－Ends－

27 March 2022

_{1. Core Accumulation Fund: 60% of the assets of the fund is invested in higher risk assets (mainly global equities), and the rest is invested in lower risk assets (mainly global bonds).}

_{2. Age 65 Plus Fund: 20% of the assets of the fund is invested in higher risk assets (mainly global equities), and the rest is invested in lower risk assets (mainly global bonds).}