HONG KONG - Hong Kong's Mandatory Provident Fund (MPF) System recorded an annualised return of 6.99% over the five-year period to March 2006, however, people invested solely in money market funds reaped a return of just 0.6%.
The MPF is the defined contribution pension system set up in 2000 to help counter the effects of an ageing population where some 12% are over the age of 65.According the Manditory Provident Fund Schemes Authority’s (MPFA) five-year investment performance review of the MPF from 1 April, 2001 to 31 March, 2006, mixed asset funds produced the highest annualised return of 6.9%, followed by equity funds (6.61%).
Bond funds posted a return of 3.06%, guaranteed funds 1.26%, capital preservation funds 0.86% and money market funds just 0.6%.
Commenting on the report, Hessler Lee, senior manager (external affairs division) at the MPFA said: “MPF scheme members should take a longer-term view when looking at their MPF investment, and consider personal risk tolerance level, number of years to retirement, personal financial position, health and family circumstances before making MPF investment choice.
”In its report, the MPFA said MPF funds had generally exhibited the expected relationship between risk and return, “namely, the higher the risk, the higher the expected return in the long run”.Yearly performance since inception fluctuated considerably during the review period, with the annualised returns ranging from -11.21% at its lowest in 2002 to as high as 20.08% in 2006.
“As MPF funds are invested in financial markets, the performance of the MPF System reflected economic and market fluctuations in Hong Kong and overseas,” the report noted.
“On the back of the sluggish worldwide economic conditions and the bearish stock markets in the initial two years (from 1 April, 2001 to 31 March, 2003), the MPF System recorded returns of -2.49% and -11.21% respectively.
”Mixed assets and equity funds produced around 40% cumulative returns for the five-year period compared with less than 5% cumulative return for money market and capital preservation funds.The review incorporated the 367 funds in the system, of which 334 were existing funds as of 31 March and 33 were terminated before that date. The returns were after fees and charges.
By Kristen Paech
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