2022 MPF fund performance review
MPF funds lost an average of about 15.7% in 2022 as high inflation prompted many developed countries to raise interest rates and tighten monetary policies while geopolitical conflicts and pandemic worries persisted.
As US inflation data appeared to stabilize in November, expectations for future interest rate hikes eased and global equities and bonds bounced back from their year low in October. In December, the sudden pivot in China and HK’s covid policies to open up its economy sooner than expected further fueled the rebound of HK and China equities.
Despite the market rebounds, as of 31 December 2022, all MPF equity, bond and mixed assets funds were all still in negative territories and the following is a snapshot of near, intermediate and long term performance of some popular MPF fund categories from market-leading MPF providers:
Among equity fund categories, Hong Kong and China equity funds ended up ahead of both US and international funds in 2022 but still lagged behind in 5 and 10-year terms. It is worthwhile to note that the low-fee HK index funds outperformed actively-managed HK and China equity funds significantly in 2022.
As no one knows which market or fund will outperform within a given time frame, instead of putting all your eggs in one basket(country/region/sector), you can diversify by choosing an international equity fund which continues to offer a respectable performance across all time frames. With this strategy, the fund will take care of rebalancing country/region/sector allocation and reduce the risk of over-concentration in any one country/region/sector.
If you would like further asset diversification by increasing allocation of bond, the core accumulation fund category is a good option. It is the more aggressive one of the 2 funds made up of the default investment strategy (DIS) and its near and intermediate term performance has also been decent. With a 60/40 split in equity/bond asset and low fund expense ratio of less than 1%, it offers a good balance of risk and return and global diversification.
In the MPF and investment world, high fund fees do not necessarily mean better performance and low fees leave more capital to work for you and may provide better odds to outperform in the long run. Some of these global equity funds and all core accumulation funds offer low total expense ratios (less than 1%). Beside fund costs, MPF members can also periodically review own portfolio allocations according to the investment objectives, timeframe and risk tolerance levels.
Please contact us if you want more information about the fund choices from various MPF trustees.
Last Update: 20th January 2023