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5 Major Types of MPF Funds

Learn More About MPF Funds and the “JJ Five” Band

Detailed Profile Of JJ FiveDetailed Profile Of JJ Five
To enhance scheme members’ understanding about MPF investment and the features of the five major types of MPF funds, the MPFA has created five cartoon characters, which form the “JJ Five” Band.
Kam Ka PoKam Ka PoKam Ka Po
Name Kam Ka Po (MPF Conservative Fund)
Slogan Earning interest very slowly
Personality Very conservative; definitely risk averse
Motto No risk, no pain; seeking stability rather than beating inflation
Hobbies Enjoys yum cha in the same restaurant every morning; likes hiding treasured items in secret places and checking them out from time to time
Investment Objectives Doesn’t expect too much; targets a rate of return similar to the Hong Kong Dollar savings rate
Investment Instruments Short-term bank deposits and short-term bonds (with an average investment period not over 90 days)
Risk Tolerance Level Relatively low
Major Risks Fluctuations in interest rates (i.e. when interest rates rise, bond prices may drop, which may lead to a drop in the fund price)
Fees & Charges
  • If the return of an MPF Conservative Fund in a particular month is lower than or equal to the MPFA's Prescribed Saving Rate (PSR) for that month, no administrative expenses can be charged by trustees. However, if the return of the MPF Conservative Fund exceeds the PSR in any one of the following 12 months, the trustees can collect the uncharged administrative expenses to the extent of the excess return after deducting the administrative expenses for that month. The PSR refers to the simple average of the interest rates offered by the three note-issuing banks in Hong Kong on Hong Kong dollar savings accounts, which is announced on the MPFA website.
  • There are two payment methods used to deduct fees and charges: (1) deducting from the assets of the fund; or (2) deducting from members’ accounts by way of unit deduction. If the fees and charges are deducted by method (1), the unit price, net asset value and fund performance can reflect the impact of the fees and charges. If the fees and charges are deducted by method (2), the unit price does not reflect the impact of the fees and charges. The fund performance figures quoted in a Fund Fact Sheet, however, can reflect the impact of fees and charges.
  • The MPFA requires that the Offering Document of each MPF scheme give examples to explain the total fees and charges to be levied by an MPF Conservative Fund during the financial period.
Features
  • An MPF Conservative Fund is a type of money market fund and is generally described as a money market fund in the Fund Fact Sheet issued by the trustees.
  • All MPF schemes are required to offer an MPF Conservative Fund.
  • All investments involve risks. An MPF Conservative Fund is a low-risk fund, but its return may not beat inflation and may even be negative.
Fans My fans are conservative investors who do not like to take risks, or people close to retirement. They always say, “We’d rather earn a return below the inflation rate than take a higher risk for a higher potential return.”
Points to Note before Investing
  • You should examine your risk tolerance level, the characteristics and risk level of the various funds, and the risk and return relationship of the funds.
  • As the slogan “Earning interest very slowly” indicates, the return of MPF Conservative Funds may not beat inflation. Hence, you should consider whether MPF Conservative Funds are too conservative with respect to your investment objectives.
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Kam Ka ChingKam Ka ChingKam Ka Ching
Name Kam Ka Ching (Guaranteed Fund)
Slogan Understanding the terms and conditions for guaranteed returns.
Personality A born negotiator who likes to make conditional promises
Motto Look before you leap
Hobbies Stamp exchange, book exchange – anything involving conditional exchanges
Investment Objectives Primarily to provide a guarantee on capital invested, but also to achieve a guaranteed rate of return
Investment Instruments Bonds, stocks, or short-term, interest-bearing money-market instruments
Risk Tolerance Level Relatively low, but it also depends on whether the guarantee conditions can be met when the MPF is withdrawn
Major Risks
  • Trustees can modify the future guaranteed rate of return with prior notice to scheme members.
  • If the assets in your Guaranteed Fund are invested in an insurance policy, you should be aware of the credit risk of the related insurance company.
  • Guarantor risk (i.e. the risk that the guarantor will fail to fulfil its obligation to provide the guaranteed return)
Fees & Charges The guarantor usually charges a guarantee fee or reserve charge, in addition to the basic fees and charges of most other MPF funds.
Features
  • The funds have two major types of guarantees: capital guarantees or return guarantees.
  • Both capital guarantees and return guarantees can be either conditional or unconditional. For conditional guarantees, the guarantee conditions must be met to benefit from the guarantee. No guarantee conditions apply in the case of unconditional guarantees. Currently, the majority of Guaranteed Funds in the MPF market provide conditional guarantees.
  • You should take note of the guarantee conditions for conditional guarantees, such as the following:
    Minimum investment period:Scheme members must commit to invest in the fund during the whole minimum investment period. If scheme members switch to another fund or if scheme members’ employers switch to another MPF scheme during this period, the guarantee will become void. Let’s say, for example, you have a Guaranteed Fund that provides a guaranteed rate of return of 2% per annum, with a minimum investment period of five years. If you switch to another fund after only three years, the guaranteed rate of return will not be applicable. Your payout depends on the actual performance of the fund at the time of withdrawal, not the guaranteed rate of return.Withdrawal requirement:Scheme members can get the guaranteed return only when their withdrawals are made under the specified conditions: for instance, after holding the fund for at least the minimum period (e.g. three years or above), making at least the minimum number of contributions (e.g. 90 times), the last contribution having been made some years previously (e.g. five years or more), reaching the age of 65, or otherwise meeting the legal requirements for the early withdrawal of accrued benefits.
  • Guaranteed Funds can be investment-linked (i.e. the fund return is based on the performance of the fund’s assets), or non-investment-linked (i.e. the fund return does not hinge on the performance of the fund assets).
  • The guarantor has the right to retain the investment earnings if they exceed the guaranteed return. The retained investment earnings may be taken as guarantor’s profit, or used to offset the underperformance of the fund at other times.
Fans My fans do not like taking risks, and prefer having guarantees. Some of them are close to retirement. They are willing to abide by the guarantee terms and conditions in order to get a guaranteed return. Their slogan is “agree to the terms and conditions to get the guarantee”.
Points to Note before Investing
  • You should examine your risk tolerance level, the characteristics and risk level of the various funds, and the risk and return relationship of the funds.
  • You should read the terms and conditions of the Offering Document very carefully, in particular the potential risks and guarantee conditions.
  • You should understand whether a capital guarantee or return guarantee is provided, and assess whether you can fulfil the relevant guarantee conditions before investing.
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Kam Ka PongKam Ka PongKam Ka Pong
Name Kam Ka Pong (Bond Fund)
Slogan Looking for steady returns
Personality Happy with the status quo; easily satisfied; will not take a huge amount of food in one helping at buffets
Motto Stay calm and save money gradually
Hobbies Jogs in the park regularly; enjoys relaxing in the shade of a tree
Investment Objectives To earn a stable income from interest or bond coupon rates, and make a profit from bond trading
Investment Instruments Bonds
Risk Tolerance Level Low to medium
Major Risks
  • Fluctuations in interest rates (When interest rates rise, bond prices may drop, leading to a drop in the fund price.)
  • Fluctuations in exchange rates (If the Bond Fund invests in bonds traded in a foreign currency, the depreciation of that foreign currency will cause a drop in the bond price, which will lead to a drop in the price of the Bond Fund.)
  • Bond credit rating (if the Bond Fund invests in a bond whose credit rating is downgraded, the bond price will normally drop, which will lead to a drop in the price of the Bond Fund.)
Features The bonds must meet the minimum credit rating or listing requirements prescribed by the MPFA.
Fans My fans are moderately conservative and relatively mature in age. They seek growth by playing it safe, but are willing to bear moderate risk for steady returns over the medium-to-long term.
Points to Note before Investing
  • You should examine your risk tolerance level, the characteristics and risk level of the various funds, and the risk and return relationship of the funds.
  • You should pay attention to the market in which the Bond Fund invests. Generally, a Bond Fund is categorized by the market it covers: e.g. Hong Kong Bond Fund, or Global Bond Fund.
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Kam Ka KwanKam Ka KwanKam Ka Kwan
Name Kam Ka Kwan (Mixed Assets Fund)
Slogan The proportion of stocks and bonds determines the risk level
Personality Flexible; a good planner
Attitude towards Life Adjusts strategies in response to different life stages
Favourite Food All dishes with dual flavours, like “yuan yang rice” (fried rice with tomato and cream sauce), sandwiches with ham and eggs, rice noodles with squid balls and fish fillet
Investment Objectives To achieve capital appreciation over the long term by investing in a combination of stocks and bonds
Investment Instruments A mix of stocks and bonds
Risk Tolerance Level Medium to high, depending on the relative weight of different assets in the investment portfolio. In general, a greater proportion of stocks is associated with a higher level of risk.
Major Risks
  • Stock market volatility
  • Fluctuation in interest rates (When interest rates rise, bond prices may drop.)
  • Fluctuation in exchange rates (If the Mixed Assets Fund invests in stocks and bonds traded in a foreign currency, the depreciation of that foreign currency will result in a drop in the prices of the stocks and bonds, leading to a drop in the price of the Mixed Assets Fund.)
  • Credit ratings of bonds (If the Mixed Assets Fund has invested in a bond whose credit rating is downgraded, the bond price will normally drop.)
Features
  • Mixed Assets Funds are also known as Balanced Funds.
  • Different Mixed Assets Funds have a different proportion of stocks and bonds. In general, a greater proportion of stocks is associated with a higher level of risk. Labelling the fund “balanced” does not necessarily imply a 50-50 split between stocks and bonds in the fund’s assets.
  • Some trustees also offer Target Date Funds, Life-Cycle Funds or asset rebalancing services to help scheme members adjust the proportion of various funds in their portfolios at different life stages.
Fans My fans cover a wide range of investors, from young to old, and from conservative to aggressive. They can adjust the proportion of stocks and bonds in their portfolios to suit their needs at different life stages. Generally, younger scheme members have a longer investment horizon, so they have a higher risk tolerance level. They may invest in a portfolio with a higher proportion in stocks in order to achieve a higher potential returns.
Points to Note before Investing
  • You should examine your risk tolerance level, the characteristics and risk level of the various funds, and the risk and return relationship of the funds.
  • As your risk tolerance level will change at different life stages, you should assess whether the proportion of stocks and bonds in the Mixed Assets Fund that you intend to invest in suits your investment needs.
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Kam Ka ChunKam Ka ChunKam Ka Chun
Name Kam Ka Chun (Equity Fund)
Slogan High potential returns come with high risk.
Personality Risk taker, adventurous with a good Adversity Quotient
Motto No risk, no gain
Pet Phrase A patient angler is rewarded with a big catch.
Hobbies Sports that are challenging and fulfilling: e.g. rock climbing, white-water rafting and skateboarding
Investment Objectives Relatively aggressive; aims for capital appreciation and a return higher than inflation over the long term
Investment Instruments Stocks
Risk Tolerance Level Relatively high
Major Risks
  • Stock market volatility
  • Fluctuation in exchange rates (If the Equity Fund invests in stocks traded in a foreign currency, the depreciation of that currency will result in a drop in stock prices.)
Features
  • There are usually three types of Equity Funds: those investing in a single market (e.g. Hong Kong Equity Fund), regional market (e.g. Asia Fund) or global market.
  • They invest mainly in stocks listed on stock exchanges approved by the MPFA.
Fans My fans are usually young people with a long investment horizon and a higher risk tolerance level. They also include other scheme members who are risk tolerant. They understand that market movements might cause great fluctuations in fund prices.
Points to Note before Investing
  • You should examine your risk tolerance level, the characteristics and risk level of the various funds, and the risk and return relationship of the funds.
  • The risk level of different Equity Funds, which invest in different stock markets, can vary considerably.
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Learn MoreWhat is an Index Fund?

An Index Fund is a passively managed fund. Its investment objective is to track the performance of the reference index. Investment managers of Index Funds passively track changes in the constituent stocks and market exposure of the target index to replicate the performance of the index as closely as possible. The fees for passively managed funds are generally lower than for other funds.

Why does the performance of the Hang Seng Index (HSI) Tracking Fund fail to follow exactly the movement of the HSI?

Although the investment objective of HSI Tracking Fund is to match as closely as practicable the performance of the HSI, there can be no assurance that the fund’s performance on each valuation day will be identical to the HSI because of different factors:

  • Fees and expenses are payable out of the assets of the HSI Tracking Fund, but the HSI does not reflect such fees and expenses.
  • Transaction fees and stamp duty are incurred when adjusting the composition of the investment portfolio of the HSI Tracking Fund to mirror the changes in the composition and weighting of the HSI.
  • When there are changes in the composition or weighting of the constituent stocks of the HSI, there may be timing differences between the changes in the HSI and the corresponding adjustment to the investment portfolio of the HSI fund.
  • HSI tracking fund holds cash to meet the redemption/switching requirements of members, which leads to tracking errors.

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