First impressions of the MPF’s performance in 2022 might reasonably be of continued market volatility and poor investment performance. Let us provide a brief recap of 2022 and look forward to the development of the MPF in 2023.
Gloomy investment return for most funds
The investment market was full of challenges in 2022. The US Federal Reserve raised interest rates several times to curb inflation. The interest rate has increased by 4.25% since March 2022. In the shadow of global economic recession, both stock and bond prices reduced considerably, thus many funds, including MPF funds generally experienced negative performance.
The net rate of return over the calendar year for the total MPF asset was about -15.5%, which was somewhere between the return achieved on major stock market indices and those on global bond market indices. Only a few funds such as the conservative funds provided a non-negative return.
MPF is a long-term investment for retirement savings. It is inevitable that investment performance fluctuates from time to time over the period to retirement. Members should review and possibly adjust the fund allocation periodically. A diversified portfolio can help to reduce risk in the portfolio. Members should not place too much emphasis on short-term fluctuations but should focus on the longer term.
Expanding MPF fund choice
In terms of fund choice, only two new funds were launched in 2022, fewer than in the past few years. Both newly launched funds are funds that are specially designed to meet the needs of those who are at or are approaching retirement. When members retire, they can choose to withdraw benefits regularly as a source of income or they can continue investing in the MPF. Having said that, these funds are also available to others who may want to invest in them for other particular reasons.
Not all MPF providers offer dedicated retirement funds, and they have only been around for a relatively short time. If you are interested in investing one of these retirement funds, you should read the relevant terms to understand the operational details.
Looking forward to 2023, a number of MPF providers are proactively looking into introducing different types of fund options to enhance the diversity of their existing fund range to meet different members’ needs, investment expectations and risk appetites. The MPFA have stated that they will prioritize applications related to China A-shares; funds that mainly invest in the stock market with large market capitalization; and special funds that meet certain conditions (such as ESG-themed funds). The future availability of additional, more innovative funds is exciting news for all members.
Delay in the implementation of eMPF
The eMPF platform is expected to significantly simplify administrative procedures, therefore improving both the employer’s and members’ experience. Also, the expected improvement in administrative efficiency will help reduce administrative fees. Therefore, all members, employers, and the MPF industry need to adapt to digital transformation at a faster pace.
The eMPF platform was originally scheduled to be launched in the 1st half of 2023, with five providers joining the platform initially to kickstart the transition. However, the MPFA has recently announced that due to the epidemic and the shortage of available talent, the introduction of the eMPF is expected to be delayed by about 8 months from the original schedule. The MPFA still maintains a target of full implementation by 2025.
