By Edward Leung
Hong Kong Investment Fund Association (HKIFA) unveiled an MPF Default Investment Strategy Funds (MPF-DIS) reference portfolio with a build-in Age-based derisking mechanism. Speaking at the seminar, service providers expected gradual pick-up upon launch in April, and it won’t compete with existing offerings.
Jointly developed by the HKIFA, the Hong Kong Trustees’ Association (HKTA) and Willis Tower Watson(WTW), the MPF-DIS reference portfolio model comprises a Core Accumulation Fund (“CAF”) and an Age 65 Plus Fund (“A65F”).
Both funds feature a combination of global equities (benchmarked against FTSE MPF All-World Index(HKD unhedged total return), global bonds a(benchmarked against Citi MPF World Government Bond Index), and cash(cash or money market instruments providing a return at MPFA Prescribed Savings Rate). All assets are inclusive of reinvestment of dividends/coupons and other incomes.
By default, the CAF focus on higher risk instruments such as equities. If an MPF member chooses to follow DIS, the Age-based Derisking mechanism will automatically transfer 6.7% of asset from the CAF to lower risk asset(bonds) starting from the member’s 50th birthday. The goal is to achieve 80% lower risk composition in the A65F by 65 years old and beyond.
To better protect investors’ interest, a material difference +/- 5% performance between the core fund and the relevant reference portfolio will have to be revealed to MPF members.
Even so, investors are urged to understand the investment strategies of different asset management companies before putting their entire trust on any particular DIS portfolio.
“ Even with DIS, different banks or asset management companies will adopt different investment styles,” said Sally Wong, CEO of HKIFA, “MPF members should understand the investment approach of their MPF fund managers throughout.”
Speaking at the presentation, James Martelli, Vanguard Hong Kong’s Head of Portfolio Review-Asia, and Andrew Smart, Head of Product Management at Principal Asset Management (Asia), told BENCHMARK that they expected a gradual 5-10% pick-up of DIS upon its imminent in April. The DIS would complement, and not compete with existing MPF products.
” The DIS is a good complement to our existing offerings, “James emphasised, BM