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Press Release

Joint review by WTW and HKIFA leads to refinement of MPF and ORSO benchmarks

FTSE Russell supports refinement and powers benchmarks with respective indices

May 10, 2023


HONG KONG, May 10, 2023 – WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company and The Hong Kong Investment Funds Association (HKIFA) have announced important refinements to the new Mandatory Provident Fund (MPF) and Occupational Retirement Schemes Ordinance (ORSO) industry benchmarks for mixed asset and global bond funds following a recent consultation with industry stakeholders. FTSE Russell supports the new refinements and powers the benchmarks with all relevant indices.

The proposed changes build on an initial joint review conducted by WTW and HKIFA in 2021, which set forth a phased inclusion of China A-shares exposure into WTW’s MPF benchmark for mixed asset funds with implementation carried out in four tranches from July 2023 to April 2024. Over this transition period, the existing Hong Kong equity sleeve would be partially reallocated from the FTSE MPF Hong Kong Index to the FTSE MPF China A Hedged Index (35% hedged to the Hong Kong dollar) to gradually reach an 80:20 weighting (see accompanying factsheet for more information). The Hong Kong equity sleeve will essentially become Hong Kong / Mainland China equity sleeve.

The current update being announced today will add two essential adjustments to the previously planned approach, namely:

  • Effective 1 July 2023, the FTSE MPF WGBI (35% hedged to the Hong Kong dollar) will be adopted as a reference index for global bond funds and global bond sleeve of mixed asset funds in place of the FTSE WGBI (25% hedged to the Hong Kong dollar) to better account for certain regulatory investment guidelines faced by MPF managers.
  • Effective 1 April 2024, China A-shares will be excluded from the Pacific Basin ex-Japan ex-Hong Kong equity sleeve to avoid overlapping equity exposure once the Hong Kong / Mainland China equity sleeve reallocation is completed.

Additionally, after careful consideration, similar changes will be concurrently reflected in a new benchmark for ORSO mixed asset funds, expanding the coverage of planned revisions to a broader universe of funds serving Hong Kong’s pension industry.

The following two changes will be made for adoption in the new ORSO benchmark:

  • Effective 1 April 2024, the current Hong Kong equity sleeve will adopt a 20% China A-shares exposure by reallocating away from the FTSE MPF Hong Kong Index toward the FTSE China A Stock Connect CNH Index. It will subsequently become an 80:20 Hong Kong / Mainland China equity sleeve.
  • Effective 1 April 2024, the FTSE WGBI (35% hedged to the Hong Kong dollar) will become the reference index for the global bond sleeve of mixed asset funds in place of the FTSE WGBI (25% hedged to the Hong Kong dollar).

The joint decision to introduce refinements for both benchmarks aims to enhance their relevance and further encourage the broad adoption of high-quality, standardised references for assessing domestic fund manager performance in the market. HKIFA members and domestic fund managers will have an opportunity to comment on these announced adjustments in the coming quarters.

"Our partnership with HKIFA and FTSE Russell reflects our joint commitment to maintaining relevant and appropriate performance benchmarks that promote transparency and informed investment decision-making,” said Raymond Kwong, Director of Investments, Asia, at WTW. “Since the Mandatory Provident Fund Schemes Authority (MPFA) added the Shanghai and Shenzhen bourses to its list of approved exchanges, we have welcomed the removal of China A-shares allocation limits for MPF managers. Despite short-term uncertainty, China will play an important role in strategic asset allocations over the long term. A broader, more dynamic investment universe will ultimately benefit millions of individuals who rely on the continued health of Hong Kong’s pension system for their retirement security."

“Feedback from our HKIFA members throughout our work with WTW and FTSE Russell has shown that the industry welcomes these upcoming changes to the industry benchmarks. The changes better align with existing financial market conditions and new regulatory developments, and will enhance the ability of fund managers to continue meeting the investment needs of MPF scheme members. Going forward, the HKIFA will continue to engage with the industry to refine both the MPF and ORSO industry benchmarks. This will continue to be required to ensure these industry benchmarks best reflect underlying financial market dynamics,” said Charles Brooke, Chairman, HKIFA Pensions Sub-committee.

“We welcome the refinements for the industry benchmarks. The upcoming reallocation into China A Shares reflects the important trend of having dedicated exposure to the Mainland China market. We also recently launched the FTSE MPF Asia Pacific ex-Japan ex-Hong Kong ex-China A Index in support of the planned amendment in the Pacific basin ex-Japan ex-Hong Kong equity sleeve,” said Emerald Yau, Head of Equity Index Product Management in APAC. “FTSE Russell will continue to work closely with HKIFA and WTW in providing the most relevant and accurate benchmarks for the MPF Scheme.”

Since the inception of the MPF system in Hong Kong more than two decades ago, WTW has worked to maintain a comprehensive set of MPF industry benchmarks for investors to measure and compare funds under the same category. Over the last two years, HKIFA and WTW have had a series of discussion meetings and incorporated the feedback from HKIFA’s members who manage MPF and ORSO funds. HKIFA and WTW have also engaged the industry, including trustees, and received positive feedback and support for the new benchmarks.

About WTW

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