MPF 2023 annual results released. MPFA’s hard work rewards “lazy” MPF members

4th January 2024

MPF’s first annual gain in 3 years highlights an uncomfortable truth

MPF Ratings’ 2023 MPF Performance Survey has now been uploaded.

Key points are as follows:

A December gain of 2.18% takes MPF’s 2023 annual gain to 3.51% (as measured by the MPFR All Fund Performance Index). (See Table 1)
In absolute dollar terms, MPF’s December’s investment gain is equivalent to $24.2bn (or $5,200 per MPF’s 4.69m members), and helps deliver a 2023 annual gain of $37.4bn.
After contributions, total MPF assets end 2023 at approximately $1.14tr (up $88.8bn for the year), equivalent to an average MPF account balance of $242,800 (up $18,900 over the year).
While US equities was 2023’s best performing MPF asset class (See Table 1), the MPFA’s mandated low fee Default Investment Strategy Fund (Core Accumulation Fund) outperformed MPF’s average return 9 months out of 12 in 2023 to produce a 1 year return of 14.75%, its 2nd best annual result since its inception in 2017. (See Chart 1)
Contrasting DIS’ Core Accumulation Fund fortunes, MPF’s most popular fund category, HK & China Equity Funds was December and 2023’s worst performing highlighting an uncomfortable truth that long term diversified investing is a better investment approach for many MPF members. (See Table 1)

Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education today released MPF Ratings’ 2023 MPF performance survey by acknowledging the key contributions played by the MPFA’s low fee mandated Default Investment Strategy (DIS) funds as MPF produced its first positive overall annual return in 3 years.

Mr Chung announced that the MPF system delivered a December market return of 2.18% to take MPF’s 2023 annual investment gain to 3.51% (as measured by the MPFR All Fund Performance Index). In dollar terms this represents a $24.2bn ($5,200 per MPF’s 4.69m members) gain in December and a 2023 accumulated investment gain of $37.4bn, or $8,000 per member. After factoring in contributions, MPF total assets end 2023 at approximately $1.14tr, or a member average of $242,800, a total annual increase of $88.8bn, or $18,900 per member.

While an overall annual investment gain of 3.51% may appear modest, MPF members who heeded the MPFA’s guidance to consider the Default Investment Strategy (DIS) Fund options saw the DIS Core Accumulation Fund deliver an investment gain of 14.75%, almost 3 times higher than MPF’s annual investment gain. An exceptional result especially when compared to the -13.37% delivered by Hong Kong and China equities, MPF’s most popular fund category. The contrast in performance highlights an uncomfortable truth that many people will not want to hear. Long term diversified investing is a better investment approach than trying to pick favourable markets and time the best entry points.

Quotes:

About 2023’s MPF investment results

“Delivering a positive annual return in the face of a challenging investment conditions, ongoing economic uncertainties and the extreme underperformance of Hong Kong and China equities, should give MPF’s 4.69m confidence that Hong Kong’s retirement system is secure and well positioned to assist members achieve their investment and retirement needs.”

“Snooze you lose”

“’Snooze you lose’ is an English idiom that means if you don’t pay attention and do something quickly, someone else will do it. DIS is colloquially known as the ‘Lazy Fund’ but in 2023 it worked hard and outperformed in 9 out of 12 months to produce a return of 14.75%, almost 3 times higher than MPF’s 2023 average annual gain of 3.51%.” (See Chart 1)

Outlook for 2024. DIS worked well in 2023, but will it in 2024?

“Encouraging late year inflation readings and the foreshadowing of lower US interest rates helped the MPF system achieve its first positive annual return in 3 years. Fixed income and selective equities do well in such conditions but as we have seen over the past few years economic data and sentiment can turn unexpectedly and this makes timing and choosing markets a risk. Diversified investing continues to be MPF Ratings’ preferred 2024 investment approach. DIS worked well in 2023 and we’re confident it will continue to offer long term value in 2024.”

Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 31st December 2023)