MPF Investment

Fund Types And Features

Bond Fund
 

What is a bond fund?

A bond fund invests in bonds or debt instruments issued by governments, public organizations, banks, commercial organizations or supranational agencies (e.g. the World Bank) to earn a stable income from interest or bond coupon rates, and make a profit from bond trading. The acquired bonds must meet the credit rating or listing requirements stipulated in the MPF legislation.

Risk level

The risk level of bond funds is generally considered to be low to medium. 

 

Returns may be affected by factors such as: 

  • fluctuation in interest rates (when interest rates rise, bond prices may drop and result in a drop in the fund price),
  • fluctuation in exchange rates (if the fund invests in bonds traded in a foreign currency, the depreciation of that foreign currency will cause a drop in the bond price, which will lead to a drop in the price of the fund), and
  • credit ratings of bonds (if the fund has invested in a bond whose credit rating is downgraded, the bond price will normally drop, which may lead to a drop in the price of the fund).

 

You should read the MPF Scheme Brochure carefully to understand the relevant risks.