Hong Kong’s Pension Assets Soar to New Heights
A remarkable 13% surge in pension assets has brought joy to the 4.75 million members of Hong Kong’s Mandatory Provident Fund (MPF) in 2024. According to MPF Ratings, an independent research firm, the MPF earned a staggering HK$102.4 billion (US$13 billion) last year, translating to HK$21,500 for each member.
A Four-Year High
The 379 MPF investment funds generated an average return of 8.8% for the year, outperforming the 3.5% gain in 2023 and the 15.7% loss in 2022. This marks the best annual return since the 11.4% gain in 2020.
Strong Investment Returns
The strong results have boosted the MPF’s total assets to HK$1.29 trillion, with each member’s portfolio increasing by an average of HK$31,600. Mark Konyn, chief investment officer with AIA, attributes this success to reducing inflation and positive overall returns.
The Benefits of Diversification
Cheng Yan-chee, managing director of the Mandatory Provident Fund Schemes Authority, emphasizes the importance of diversification in mitigating investment risks. He encourages members to review their MPF investments regularly and build a diversified investment portfolio.
A Long-Term Perspective
Members are advised to take a long-term view of their MPF investments, as they will only need the funds decades later when they retire. Cheng warns against short-term investment perspectives, which can lead to losses from buying high and selling low.
US Equity Funds Lead the Way
US equity funds emerged as the top-earning fund category in 2024, with an annual return of 21.6%. Japan equity funds followed closely at 19.6%, while Hong Kong and China equity funds finished the top three at 15.9%.
Mixed-Asset Funds and Default Investment Strategies
Mixed-asset funds, which invest in equities and bonds, gained 9.9% in 2024. The default investment strategy (DIS), which uses a diversified approach to investing in global stocks and bonds, also performed well, with DIS options reporting gains of up to 9.3%.
Global Bond Funds and European Equity Funds Struggle
Global bond funds were the worst performers, with a loss of 2.7%, while European equity funds lost 0.7%.
Looking Ahead
As members look to the future, they must keep an eye on risks and opportunities related to US president-elect Donald Trump’s policies. Francis Chung, MPF Ratings chairman, urges diversification to minimize uncertainty and recommends the MFA’s mandated DIS funds as the preferred investment option.
A Compulsory Retirement Scheme
Established in 2000, Hong Kong’s MPF is a compulsory retirement scheme that gathers monthly contributions from employers and employees, representing up to 5% of the employee’s monthly salary. The mandatory contribution is capped at HK$3,000 every month, half from the employee and matched by the employer.
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