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While 2020 finally comes to an end, the surging challenges caused by the global pandemic are yet to be addressed. Be that as it may, there are still investment opportunities for the year ahead. As the MPF expert, Gain Miles prepared a summary of 10 remarkable findings to allow MPF investors to leverage for their investment portfolios in 2021.
The 10 things are:
Average gain of HK$26,920 per member
Performance of MPF beast the Hang Seng Index
Greater China Equity is the best performing asset class
A new milestone: 20-year history with an average annual return of 4.2%
HK$1 trillion of total assets will be expected to increase by fourfold in the next 20 years
Green light to A-shares for wider range of investment choice
First launch of retirement income fund in the MPF market
Fierce competition in market - alliance of Allianz and Manulife
Decreasing trend of guaranteed rate of return on guaranteed funds under a low interest rate environment
Three ways to improve overall MPF returns
1. Average gain of HK$26,920 per member in 2020
As of 31 December 2020, the Gain Miles MPF Composite Index rose by 28 points (+11.8%) to 257.
The three major index categories showed varying degrees of positive performance:
Gain Miles MPF Equity Fund Index rose by 50 points (+15.7%) to 365;
Gain Miles MPF Mixed Asset Fund Index rose 29 points (+13.2%) to 253;
Gain Miles MPF Fixed Income Fund Index rose 3 points (+2.7%) to 129.
The launch of the vaccination further extends the gain and improvement of the market investment sentiment, driving the MPF market to perform well in Q4 2020. By the end of the year, each MPF member achieved $26,920 for the whole year.
2. Enlargement in Market Coverage
While the Hang Seng Index is regarded as the HK stocks market performance, affected by the COVID-19 situation in 2020, the total return of Hang Seng Index was -0.4% as of December 31. In a contrary, the Gain Miles MPF HK Equity Fund Index recorded +14.6%, which outperformed the Hang Seng Index by 15%. The difference reflected the abilities of stock selection by MPF fund managers, who can actively improve the MPF return under this volatile market conditions.
3. Greater China Equity is the best performing asset class in 2020
The best performing equity asset class in 2020 is Greater China Equity. The average 2020 return of all Greater China Equity funds were 25.2%. However, with the same asset class of Greater China Equity, there was a great deviation on the performance among different schemes and providers.
For example, the best performing fund under Greater China Equity was My Choice China Equity Fund, with 51.7% return while the worst performing fund was BEA China Tracker Fund, with a loss of 2.8%.
4. A New Milestone for MPF – 20-year history with an average annualized return of 4.2%
MPF has been launched for 20 years since 2000. Although the general public is still questioning on management fee, return and even its ability to offer adequate retirement protection, the average return of MPF is well, with an annualized return of 4.2% (which is above the market inflation of 1.8% by more than double.
To continue to outperform in the MPF market, MPF members should actively manage their account with regular review of their investment portfolio. According to Billy Wong, the Executive Director from Gain Miles, members should have an accurate return target for their MPF portfolio, for example, 4% to 6% annualized return (net-of-fee performance), could help members to evaluate and manage their MPF portfolio’s performance more effectively and efficiently and attain their saving target for retirement.
5. HK$1 trillion of total assets will be expected to increase by fourfold in the next 20 years
The total MPF assets exceeded HK$1 trillion for the first time in July 2020 and the average assets per member was HK$ 221,772. According to the calculation undertaken by the Actuarial Society of Hong Kong, total MPF assets may hit HK$4 trillion in 20 years later due to the increase in investment horizons and the power of compound interest.
With the future implementation of eMPF, MPF members will be empowered with the flexibility to review and adjust their accounts and investment portfolios as frequent as possible.
For all 10 things in full details, please download the Gain Miles Insights paper.
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