PrepLicense: HK MPF · Study Notes · Chapter 5

MPF Chapter 5: MPF Schemes and Investment

This chapter covers scheme categories, constituent fund types, investment restrictions, the Default Investment Strategy (DIS), fee and performance disclosure, and transfer procedures.

1. MPF Scheme Categories

Master Trust Schemes (the most common, multi-employer), Employer Sponsored Schemes (single large employer), and Industry Schemes (e.g. construction, catering).

2. Constituent Fund Types

Equity Funds, Bond Funds, Mixed Asset Funds, Guaranteed Funds, the MPF Conservative Fund, and DIS funds (Core Accumulation Fund, Age 65 Plus Fund).

3. MPF Conservative Fund

Invests in HKD short-term bank deposits and high-grade short-term bonds, targeting capital preservation and modest returns under a fee-cap mechanism.

4. Default Investment Strategy (DIS)

Launched April 2017, DIS provides standardised, age-based de-risking for members not actively selecting funds. Comprises the Core Accumulation Fund (CAF) and Age 65 Plus Fund (A65F), with a management fee cap of 0.75% plus 0.2% recurrent out-of-pocket expenses.

5. Investment Restrictions

MPF funds must meet diversification requirements: single-issuer concentration limits, derivatives restricted to risk management and efficient portfolio management, and prohibition on holding physical commodities or real property directly.

6. Fee Disclosure

Trustees must disclose total expenses via the standardised Fund Expense Ratio (FER), shown in fund fact sheets, annual reports and monthly statements.

7. Performance Disclosure

Historical returns (1-yr, 3-yr, 5-yr, 10-yr and since inception), volatility, and benchmark comparisons must be provided.

8. Fund Switching and Transfer

Members may switch funds within a scheme (typically free or low-cost) and transfer between schemes under ECA and general transfer rules.

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