Pension fund rockets to nearly $1.3 trillion

June Chen

The total net asset value of the Mandatory Provident Fund rose to nearly HK$1.3 trillion by the end of last year, according to Mandatory Provident Fund Schemes Authority chair Ayesha Macpherson Lau.

Hong Kong's pension fund average net return for 2024 reached 8.6 percent, more than double the 3.4 percent in 2023, though far lower than the peak of 2009 when it was 26.6 percent.

Lau said on her blog that the average net return for equity funds was 15.3 percent and for mixed assets funds it was 7.3 percent.

Core accumulation funds of the default investment strategy launched in 2017 - for those with limited time or knowledge about MPF management - averaged an annualized net return of 9.3 percent in 2024.

The MPF has 12 approved trustees providing 24 schemes involving 379 constituent funds for over 4.7 million scheme members.

Lau noted that some commercial institutions in the market release short-term performance MPF data every month. But she said as the MPF is a long-term investment spanning 40 years, short-term data does not have much reference value, and is more likely to make scheme members mistakenly view the MPF from the perspective of short-term speculation, leading to unnecessary losses.

Lau said there are still many uncertainties in the market, such as the pace of interest rate cuts by major central banks around the world, changes in geopolitical conditions, and escalating trade frictions.

Scheme members, she added, should diversify investment to cope with risks and impacts brought by market fluctuations.

To optimize the management of the MPF, the authority has expanded the scope of permitted investment targets, Lau said. This includes expanding the scope of funds that can be invested in listed real estate investment trusts or REITs - companies that allow investors to earn income from real estate without having to buy, manage, or finance properties themselves.

It also encourages the use of index-tracking collective investment schemes - which have the sole objective of tracking a particular market index - as they can reduce fees and lower expenditures.

As of last September, the net asset value of the MPF invested in ITCIS reached HK$220 billion, accounting for more than 16 percent of the total value.

june.chen@singtaonewscorp.com