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MPF Brings Structural Changes to HK Fund Industry
The Mandatory Provident Fund (MPF) System is likely to bring major structural changes to the fund industry, according to the Hong Kong Investment Funds Association (HKIFA) Thursday, December 21.
Analyzing the impact of MPF on the fund industry in Hong Kong, Paul Chow, chairman of the HKIFA, said, "MPF represents a major step forward in the movement to defined contribution and member choice."
This development represents a shift of power, and with it, investment risks from employers to employees.
To make use of this power, employees should have sufficient knowledge of asset classes and should understand the risk-return trade off.
"To facilitate this to happen, investment managers should be able to provide effective and ongoing employee communication to help employees develop the right mix of assets to formulate an effective wealth creation strategy," he said. "This will become even more pertinent as the product range expands."
At present, most MPF schemes are fairly similar in that most of them typically have five to six constituent funds and they are primarily basic lifestyle products.
"However, as employees' comfort level with the system increases, and as they become more sophisticated, it is likely that there will be an increasing demand for a broader product range," Chow said.
The need will become more acute as employees start to change jobs because employees can select their own MPF providers for benefits accrued from past employments.
The expansion in the product range may encourage the formation of more multi-manager independent platforms, and to excel in these platforms, investment managers have to persuade individual members to select their funds from the range.
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