The best place to invest in mutual funds in Hong Kong
Mutual fund is a popular investment vehicle and can be purchased from different providers such as private banks, brokerages, insurance companies and even MPF trustees. The following is a comparison between the various providers for your reference:
Fees and Cost
No matter where you buy the funds, there will always be an annual underlying fund level fee that covers fees for the investment manager, audit fees and legal costs etc.
Some funds may charge a performance fee based on investment returns.
Retail/private banks and brokerages may charge a subscription fee on each purchase and/or a redemption fee on each sale.
Some insurance companies and fund brokerages may charge a platform fee or annual administration fee based on asset under management in lieu of subscription and redemption fee.
Investment linked assurance schemes(ILAS) are offered by insurance companies and generally include another layer of annual maintenance fee and/or portfolio management fee, early surrender/withdrawal charges. Some plans might include an initial charge of up to 100% of first year premium and up to 6% of each subsequent investment, as well as increasing annual cost of insurance fee which can quickly erode the account value.
MPF special voluntary contribution(SVC) may only charge a nominal fee for more than 4 withdrawals in a financial year and do not charge any of the other fees above on all of their funds and the fee structure is simple and transparent.
Fund Choices
Generally, you can find a wide selection of funds by different industries, countries and asset classes at bank, brokerages and insurance companies.
MPF fund selections are generally limited to equity, bond, mixed asset, guaranteed and conservative funds and any new funds must be reviewed thoroughly by MPFA before approval. Each MPF trustee offers default investment strategy(DIS) with fund choices and arrangement that provides a cap in fees, automatic reduction in investment risks according to member’s age and globally diversified investment strategy.
Performance and risk level
The performance data you see on the fund fact sheets will generally reflect the underlying fund level fee. You will have to add up all the other fees before you can get a clear picture of the real return.
Risk scales may not be easily comparable among different providers trustees due to different rating methodologies. Generally the more volatile the price is, the higher the risk.
Conclusion
A famous quote Warren Buffet states: “Performance comes and goes and costs. Fees never falters.” No one can guarantee high costs or fancy investment objectives will get your higher returns. Higher fees will definitely erode your principal annually.
Banks, brokerages and insurance companies provider more choices although each purchase and sale will come with a cost directly(subscription or redemption fee) or indirectly(platform fee).
Proponents of ILAS say you can switch funds as many times as you want for free but very few of them will mention there is the extra annual account maintenance/portfolio management fee.
MPF special voluntary contribution(SVC) funds give you the flexibility to buy, sell, switch and redeem your funds without those additional costs.
Many insurers in the market offer both ILAS, fund platforms and MPF SVC while some banks has both fund platforms and MPF SVC. However, the sales and marketing will usually focus on high fees and more complex plans. It is my intention we will make informed choices after learning more about the different providers.
Last update: 21st July 2022