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MPFA’s statement on MPF fund fees

In response to reports on MPF fund fees, the Mandatory Provident Fund Schemes Authority (MPFA) issued the following statement:
  1. Since the MPFA proposed introducing the Employee Choice Arrangement (ECA) a few years ago, MPF fund management fees have been on the decline. 
  2. ECA was launched in November 2012. Since then, the management fees of 145 funds have been reduced. The biggest reduction was 44% or 80 basis points. 
  3. The MPFA has not approved any trustee to raise the management fees of its funds in recent years. Any increase in the Fund Expense Ratio (FER) of funds is not due to an increase in management fees. 
  4. The average FER of all MPF funds went down from 1.74% as at October 2012 to 1.72% as at October 2013. The average FER mentioned in the reports is a simple average, not a weighted average as has been adopted by the MPFA1. A weighted average more accurately reflects the impact of the actual fees charged. 
  5. The FER is a ratio that measures all expenses of an MPF fund as a percentage of the fund size. It is a historical, lagging figure. It reflects the data of the last financial year but not necessarily the latest fee level. 
  6. Among the funds which had an increase in their FER in the past year, MPF Conservative Funds had the biggest increase. Under the law, MPF Conservative Funds have a fee-charging mechanism different from other types of MPF funds. Their fee level, to a large extent, depends on their rate of investment returns. If the investment return is higher, the fund can charge a higher administration fee. In any case, the amount of fee charged by the fund cannot exceed the fee level prescribed in the offering document of the relevant scheme. 
  7. For funds other than MPF Conservative Funds, the increase in their FER was not due to an increase in management fees. It can be attributed to other factors, such as changes in the fund’s asset value or expiry of fee waivers offered by trustees. 
- Ends -
 
1 November 2013

1The average FER adopted by the MPFA is the average FER of all MPF funds weighted by their respective net asset values.
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