Busy MPF reporting season raises questions

5th August 2021

HSBC surprises market as small players show size is no barrier to lower costs

Key points are as follows:

  • MPF Ratings’ highlights key outcomes in a busy fee reporting period for MPF schemes.
  • 13 out of 27 MPF schemes announced updated Fund Expense Ratios (FER) in Q2 2021 with 67 constituent funds seeing upward revisions and 104 funds seeing reductions.
  • The MPF industry median FER (which indicates the actual expenses members were charged as a percentage of fund assets) now stands at 1.43% (See table 1).
  • BEA (MPF) Value Scheme and My Choice MPF Scheme, with a combined market share of only 0.3% produced FERs of 0.90% and 1.03% respectively and are the two cheapest MPF schemes available to the public (Also see table 1).
  • HSBC’s SuperTrust Plus was the most fee competitive of the large MPF schemes. With a market share of 18.3% it ranked 5th, with a FER well below the market median of 1.43%, at 1.18% (Also see table 1).

Francis Chung (叢川普), Chairman of Hong Kong’s specialist independent MPF research group, MPF Ratings, today attributed a busy fee reporting season, which saw a substantial number of MPF constituent funds see reductions in expenses, to increased competition amongst MPF schemes.

The 2021 June quarter saw 13 out of 27 MPF schemes announce updated Fund Expense Ratios (FER) with 104 out of 407 MPF constituent funds recording lower FERs compared to their previous reporting period. The MPF industry median FER now stands at 1.43%.   

Despite the lower fund expenses inclusive of investment management, trustee and administration fees, Mr Chung noted that not all MPF members will reap the benefits, “While MPF industry median expenses have fallen to 1.43%, and 104 constituent funds reported lower expenses in the latest reporting period, most MPF members pay higher fees than the market median given they’re mostly members of larger more expensive schemes.”

When asked if there were any standout MPF schemes, Mr Chung surprisingly pointed out that size and scale was not a factor in lower expenses, “The two cheapest publicly available MPF schemes are BEA (MPF) Value Scheme and My Choice MPF Scheme, but with a combined market share of only 0.3% their fee competitiveness only benefits a very small MPF membership base.  Economies of Scale should enable large MPF schemes to effectively pass on cost savings to members, but amongst the larger players, the most cost effective is only ranked 5th, HSBC’s SuperTrust Plus, with a fund expense ratio of 1.18% compared to a market median of 1.43%.”

While fees are an important consideration Mr Chung also pointed out that fees need to be looked at in the context of the value for money a member receives from its MPF scheme and after fee performance results.

Table 1: MPF Scheme Assets and latest fund expense ratios (FERs) as at 30 June 2021

Source: MPF Ratings

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