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Fifteen-year annualized investment return of the MPF System was 3.1%
The Mandatory Provident Fund Schemes Authority (MPFA) announced today (26 January) that the annualized 15-year investment return of the Mandatory Provident Fund (MPF) System was 3.1%.
Launched on 1 December 2000, the MPF System accumulated total assets of $590 billion in the 15 years to 30 November 2015. The sum included $475 billion1 in MPF contributions (net of amounts withdrawn) and $114 billion in investment returns, net of fees and charges.
The average yearly inflation rate over the same period (1 December 2000 to 30 November 2015) was 1.8%. In other words, the 15-year investment return of the MPF System was higher than the inflation rate of the same period.
MPFA Chairman Dr David Wong said, “Since MPF scheme members’ assets are invested in financial instruments in the market, the investment performance of the MPF System is inevitably affected by the cycles of the financial market which can be very volatile at times. In addition, over 60% of total MPF assets are invested in equities. As a result, the performance of equity markets has a marked impact on the overall return of the MPF System.
“Despite the repercussions of significant market volatility during the 15-year period, the MPF System has added value to scheme members’ retirement savings.”
He said, “The average working life is around 40 years, so it takes this long for a retirement savings system like the MPF to mature. Only after around 40 years can we see more comprehensively the benefits that such a system can produce.
“The MPF is a long-term investment. Scheme members should not be overly concerned about short-term market fluctuations.”
Dr Wong also reminded scheme members that the System’s return did not represent what an individual scheme member would get.
He said, “The System’s return is driven by the collective investment choices of all members and reflects the results of their investments across many different asset classes and regions.
“Different scheme members have different returns. Some have had a better return and some not so good, depending primarily on their choice of funds, the timing of their participation and contributions, and the performance of the markets the funds invest in.”
MPFA Non-executive Director Mr Philip Tsai pointed out that different types of funds had different rates of return.
The annualized and cumulative returns of the six different types of MPF funds over the past 15 years were as follows:
Mr Tsai said that even for the same type of funds, the performance could vary significantly, depending on their investment strategy and the markets they invested in. For example, Asia equity funds had an annualized return of 6.1% over the 15-year period, whereas Europe equity funds had only a 0.9% annualized return.
He added that MPF funds had generally exhibited the expected relationship between return and risk; that is, the higher the expected return in the long run, the higher the potential risk.
He therefore advised scheme members to look at return figures in the context of the associated risk levels. While equity funds were the best performers over the 15-year period, they also had the highest level of risk. Equity funds went up by 15.4% in a month and fell by 20.6% in another, which means that their monthly returns had a range as wide as 36 percentage points in the 15-year period.
Mr Tsai said diversification across regions and asset classes tended to lower the overall investment risk. For instance, global equity funds recorded substantially lower volatility than some single market equity funds (such as Hong Kong equity funds and Asia equity funds) over the 15-year period.
He stressed that it was important for scheme members to look at funds’ past performance with caution as it was not an indicator for predicting future performance.
Mr Tsai also pointed out, “Scheme members should regularly review their MPF portfolio. They should take into consideration factors such as their personal investment goals and risk tolerance level, and consider adjusting their asset allocation approach and risk return tradeoffs if appropriate. They should also take into account factors such as fees and charges, the quality of trustees’ services and the suitability of the funds for their own circumstances, including the years to retirement and personal investment objectives.”
More details about the 15-year investment performance of the MPF System can be found in a report uploaded to the MPFA website today.
Mandatory Provident Fund Schemes Authority Chairman Dr David Wong (second from left), Non-executive Director Philip Tsai (second from right), Chief Corporate Affairs Officer and Executive Director Cheng Yan-chee (first from left) and Senior Manager of the Research and Statistics Section Edwin Lee (first from right) highlighted the key figures in the report A 15-year Investment Performance Review of the MPF System at a press conference today.
– Ends –
26 January 2016
Launched on 1 December 2000, the MPF System accumulated total assets of $590 billion in the 15 years to 30 November 2015. The sum included $475 billion1 in MPF contributions (net of amounts withdrawn) and $114 billion in investment returns, net of fees and charges.
The average yearly inflation rate over the same period (1 December 2000 to 30 November 2015) was 1.8%. In other words, the 15-year investment return of the MPF System was higher than the inflation rate of the same period.
MPFA Chairman Dr David Wong said, “Since MPF scheme members’ assets are invested in financial instruments in the market, the investment performance of the MPF System is inevitably affected by the cycles of the financial market which can be very volatile at times. In addition, over 60% of total MPF assets are invested in equities. As a result, the performance of equity markets has a marked impact on the overall return of the MPF System.
“Despite the repercussions of significant market volatility during the 15-year period, the MPF System has added value to scheme members’ retirement savings.”
He said, “The average working life is around 40 years, so it takes this long for a retirement savings system like the MPF to mature. Only after around 40 years can we see more comprehensively the benefits that such a system can produce.
“The MPF is a long-term investment. Scheme members should not be overly concerned about short-term market fluctuations.”
Dr Wong also reminded scheme members that the System’s return did not represent what an individual scheme member would get.
He said, “The System’s return is driven by the collective investment choices of all members and reflects the results of their investments across many different asset classes and regions.
“Different scheme members have different returns. Some have had a better return and some not so good, depending primarily on their choice of funds, the timing of their participation and contributions, and the performance of the markets the funds invest in.”
MPFA Non-executive Director Mr Philip Tsai pointed out that different types of funds had different rates of return.
The annualized and cumulative returns of the six different types of MPF funds over the past 15 years were as follows:
| Fund Type | 1 December 2000 – 30 November 2015 | |
| Annualized Return | Cumulative Return | |
| Equity Funds | 4.1% | 83.0% |
| Mixed Assets Funds | 3.9% | 77.1% |
| Bond Funds | 2.8% | 52.2% |
| Guaranteed Funds | 1.3% | 20.6% |
| MPF Conservative Funds | 0.8% | 12.9% |
| Money Market Funds | 0.6% | 8.8% |
Mr Tsai said that even for the same type of funds, the performance could vary significantly, depending on their investment strategy and the markets they invested in. For example, Asia equity funds had an annualized return of 6.1% over the 15-year period, whereas Europe equity funds had only a 0.9% annualized return.
He added that MPF funds had generally exhibited the expected relationship between return and risk; that is, the higher the expected return in the long run, the higher the potential risk.
He therefore advised scheme members to look at return figures in the context of the associated risk levels. While equity funds were the best performers over the 15-year period, they also had the highest level of risk. Equity funds went up by 15.4% in a month and fell by 20.6% in another, which means that their monthly returns had a range as wide as 36 percentage points in the 15-year period.
Mr Tsai said diversification across regions and asset classes tended to lower the overall investment risk. For instance, global equity funds recorded substantially lower volatility than some single market equity funds (such as Hong Kong equity funds and Asia equity funds) over the 15-year period.
He stressed that it was important for scheme members to look at funds’ past performance with caution as it was not an indicator for predicting future performance.
Mr Tsai also pointed out, “Scheme members should regularly review their MPF portfolio. They should take into consideration factors such as their personal investment goals and risk tolerance level, and consider adjusting their asset allocation approach and risk return tradeoffs if appropriate. They should also take into account factors such as fees and charges, the quality of trustees’ services and the suitability of the funds for their own circumstances, including the years to retirement and personal investment objectives.”
More details about the 15-year investment performance of the MPF System can be found in a report uploaded to the MPFA website today.
Mandatory Provident Fund Schemes Authority Chairman Dr David Wong (second from left), Non-executive Director Philip Tsai (second from right), Chief Corporate Affairs Officer and Executive Director Cheng Yan-chee (first from left) and Senior Manager of the Research and Statistics Section Edwin Lee (first from right) highlighted the key figures in the report A 15-year Investment Performance Review of the MPF System at a press conference today.
– Ends –
26 January 2016
1 Figures may not sum up to the total because of rounding.
