What is Default Investment Strategy (DIS)？
The Default Investment Strategy (DIS) is a ready-made MPF investment solution that all MPF schemes are required by law to offer. Introduced in 2017, it is designed for scheme members who do not know how to choose MPF funds or who have no time to manage their MPF investments, allowing them to achieve better retirement protection.
If you have not specified a fund choice when registering an MPF account, your trustees will invest your contributions automatically according to DIS. If you find DIS meets your personal needs, you can also choose to invest your MPF benefits either according to DIS or in the two funds under DIS, namely, Core Accumulation Fund (CAF) and Age 65 Plus Fund (A65F).
Please be aware that if you choose the individual funds under DIS as a standalone fund choice, rather than as part of DIS, you will still benefit from the two major features of DIS which are fee caps and globally diversified investment. However, automatic reduction of investment risk according to members’ age will not apply.
Please be aware that if you choose the individual funds under DIS as a standalone fund choice, rather than as part of DIS, you will still benefit from the two major features of DIS which are fee caps and globally diversified investment. However, automatic reduction of investment risk according to members’ age will not apply.
Three Key Features of DIS
Automatic reduction of investment risk as members approach retirement age (Automatic de-risking)
MPF is a long-term investment. Before choosing your investment portfolio, it is crucial to assess your risk tolerance level. Age is as one of the key factors relevant to your risk tolerance level. Since there is still a long time before retirement, younger scheme members have an investment period of up to three to four decades which could even out the ups and downs of the financial markets. In accordance with the expert advice from the Organisation for Economic Co-operation and Development (OECD), younger scheme members should consider taking on relatively more investment risk to achieve higher expected returns.By contrast, scheme members who are closer to retirement typically have a relatively lower risk tolerance level, because they have less time to ride out fluctuations in the investment cycle and make up for any sharp drops in the value of their investments. Therefore, they should consider investment options with less investment risk. Learn more about planning for retirement at different stages of life.
As such, adjusting the risk level with age is an important strategy in managing investment risks. DIS invests globally in different asset classes based on a pre-set proportion automatically according to the member's age, without requiring any effort from the member.
Two Funds under DIS
DIS comprises two mixed assets funds, the two funds invest globally in different asset classes in different proportions:- Core Accumulation Fund (CAF) – About 60% of assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
- Age 65 Plus Fund (A65F) – About 20% of assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
How does “automatic de-risking” work?
If you have chosen to invest according to DIS, all MPF benefits in your account will be fully invested in the relatively high-risk CAF before you turn 50.
Once you reach the age of 50, your trustee will automatically reduce your investments in CAF and increase your investments in A65F according to the percentages set out in the De-risking Table1 once a year2.
As the MPF benefits invested in CAF are gradually reduced while those invested in A65F are gradually increased from age 50 to 64, by the time you reach age 65, all your MPF benefits will be fully invested in A65F.
| 1 | The proportions of investments in these two funds may vary due to changes in the fund prices after the trustee makes the adjustment. The percentages of the two funds are as those set out in the above table when the automatic de-risking is made but the percentages do not remain exactly the same throughout the year. |
| 2 | The automatic de-risking is carried out on your birthday, from your 50th to 64th birthday. If the birthday falls on a non-working day, it will be extended to the next working day. For details of the timing of automatic de-risking, please refer to the MPF Scheme Brochure of individual schemes or contact the relevant trustees for enquiries. |
Fee caps
Fees and expenses charged to an MPF fund can have a significant impact on its long-term returns. All other things being equal, when fees are lower, the net returns of fund will be higher.The fees and expenses of the two funds under DIS (i.e. CAF and A65F) are capped as follows:
Fee caps
set at
0.95%^
set at
0.95%^
^(and it will be further reduced to 0.85% after individual trustees and schemes have onboarded the eMPF Platform)
Management Fees
(including fees for trustee, investment manager, etc.)≤0.75% per annum of the net asset value of the fund
(calculated on a daily basis)
Recurrent out-of-pocket expenses
(including annual audit fees, printing expenses and postage, etc.)≤0.2% per annum of the asset value of the fund
(and it will be further reduced to 0.1% after individual trustees and schemes have onboarded the eMPF Platform)
You can visit the MPF Fund Platform to learn more about the fees and charges of CAF and A65F by following three simple steps below:
Global investment for risk diversification
MPF provides you with basic retirement protection. When you aim for asset appreciation and pursue high returns, you also need to pay attention to whether the potential risks of the investment portfolio are in line with your risk tolerance level.Learn more on investment risks and returns.
One of the ways to manage investment risks is through diversification. This involves diversifying your capital across:
| 1) | different asset classes: investing in various asset classes with low correlation, such as stocks and bonds, helps to diversify risk since the factors affecting the prices of certain assets at a specific time do not affect the prices of another type of asset. |
| 2) | different regions：diversifying investments across markets in different regions is important because asset prices are affected by social and economic changes in the invested regions (including fluctuation in interest rates and credit ratings) which can introduce investment risks. It is advisable to avoid excessive concentration of investments in individual region. |
CAF and A65F under DIS are mixed assets funds. Both funds invest globally in different markets and in different asset classes (as shown in the diagram), which can help diversify investment risks.
Like other investments, investing according to DIS also involves investment risks, and returns are not guaranteed. Given the volatilities that can occur in investment markets, especially in the short term, CAF and A65F are subject to pricing changes, both up or down.In addition, although all DIS under the MPF schemes adopt similar investment objectives, they may not deliver similar investment returns. This is because of differences in their approaches to asset allocation, and in the investment holdings and markets they invest in.
For more information about the investment risks associated with DIS under individual schemes, please refer to the MPF Scheme Brochure.
For further details, please refer to the FAQs about DIS.