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13% Increase in Pension Assets for MPF Members
The 4.75 million members of Hong Kong’s Mandatory Provident Fund (MPF) have enjoyed a significant boost to their pension assets, thanks to the best investment returns in four years. According to data from MPF Ratings, an independent research firm, the MPF earned a combined HK$102.4 billion (US$13 billion) last year, equivalent to HK$21,500 for each member.
Strong Investment Returns
The 379 MPF investment funds generated an average return of 8.8 per cent for the year, compared with a 3.5 per cent gain in 2023 and a loss of 15.7 per cent in 2022. This is the best annual return since an 11.4 per cent gain in 2020.
Boost to Total Assets
The strong results boosted the MPF’s total assets to HK$1.29 trillion, taking into account investment gains and new contributions from members. The sum works out to HK$271,500 per member, a 13 per cent increase from the previous year, indicating an average portfolio increase of HK$31,600 per member.
A Productive Year for Investors
"2024 has been a productive year for investors," said Mark Konyn, chief investment officer with AIA, one of the major MPF providers. "Reducing inflation and positive overall returns have supported the growth of retirement savings."
Benefits of the Pension Scheme
The strong performance of the MPF last year shows the benefits of the pension scheme, according to Cheng Yan-chee, managing director of the Mandatory Provident Fund Schemes Authority. "The MPF’s performance reflects its resilience and stability over the years," Cheng said. "MPF scheme members are encouraged to make use of the merits of the MPF system that provide funds in different markets and asset classes, review their MPF investments regularly and build a diversified investment portfolio to mitigate investment risks."
Long-Term Perspective
He urged members to take a long-term view of their MPF investments because they will only need it decades later when they retire. "MPF scheme members should not view the MPF from a short-term investment perspective, nor attempt to time the market, as this could lead to losses from buying high and selling low," he added.
The Mandatory Provident Fund
Established in 2000, Hong Kong’s MPF is a compulsory retirement scheme that gathers monthly contributions from employers and employees, representing up to 5 per cent of the employee’s monthly salary. The mandatory contribution is capped at HK$3,000 every month – half from the employee, matched by the employer.
US Equity Funds Top Performers
US equity funds were the top-earning fund category in 2024, with an annual return of 21.6 per cent, followed by Japan equity funds at 19.6 per cent, while Hong Kong and China equity funds finished the top three at 15.9 per cent, MPF Ratings data showed.
Mixed Asset Funds Perform Well
Mixed-asset funds, which invest in equities and bonds, gained 9.9 per cent in 2024, according to MPF Ratings’ data. The default investment strategy (DIS), which uses a diversified approach to investing in global stocks and bonds and reduces the risk level according to the members’ age, also performed well.
Global Bond Funds Underperform
Global bond funds were the worst performers with a loss of 2.7 per cent, while European equity funds lost 0.7 per cent.
Looking Ahead
Diversification is key in uncertain times, and MPF Ratings’ chief executive urged members to keep an eye on risks and opportunities related to US president-elect Donald Trump’s policies, such as his threats to increase tariffs on Chinese goods and plans for deregulation. "While this rhetoric has proved to be popular for US equities, a US bias in MPF portfolios could come with consequences," Chung said.
Diversification Minimises Uncertainty
"Diversification minimises uncertainty, and the MFA’s mandated DIS funds continue to be MPF Ratings’ preferred investment option for MPF’s 4.75 million members."
About This Article
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages.
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