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MPF Investment
Fund Types And Features
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What is a guaranteed fund?
A guaranteed fund (GF) provides some forms of guarantee to scheme members investing in the fund, usually on the capital invested or on a minimum rate of return. It invests in bonds, stocks, or short-term, interest-bearing money-market instruments. Apart from managements fees, a guarantee charge is usually charged for providing such a guarantee. Most GFs in the MPF market offer conditional guarantees, which require fulfilment of a set of conditions in order to enjoy the guarantee, while an unconditional guarantee is provided without any conditions imposed. You should read the MPF Scheme Brochure carefully to understand the guarantee conditions.
Conditional guarantees
If scheme members fail to meet the qualifying conditions of GFs, they will not be entitled to the guarantee. Therefore, it is crucial to review the details and understand the qualifying conditions before investing in a GF.
The qualifying conditions may include:
- holding the fund for a minimum period (e.g. three years or above),
- making a minimum number of contributions (e.g. 90 contributions),
- holding the fund for a minimum period (e.g. five years or more) after making the last contribution, or
- reaching the age of 65, or otherwise meeting the legal requirements for withdrawal of MPF (e.g. early retirement).
Risk level
The risk of GFs is considered relatively low, but it also depends on whether the guarantee conditions can be met when the MPF is withdrawn. Scheme members who invest in GF that invests solely in a fund in the form of an insurance policy are subject to the credit risk of the related insurance company.
You should read the MPF Scheme Brochure carefully to understand the relevant risks.
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