After returning 15.35% in 2017 to date, Hong Kong’s HK$701 billion Mandatory Provident Fund (MPF) is three months shy of reporting its best performance in eight years, according to data from fund research company Thomson Reuters Lipper.
Should the pension scheme’s 481 funds continue at the same level, Lipper says the MPF would have its best year since 2009, when it returned 25.89%. Last year, the fund returned 1.26%, and reported a 3.1% loss in 2015.
According to Lipper, Hong Kong equity funds were the best performers for the first three quarters of 2017, returning an average of 29.19% and beating the Hang Seng index, which rose 25% in the same period to become the best-performing market worldwide.
Hong Kong equities were followed by Greater China equity funds and Asia excluding Japan funds, returning 28.94% and 26.97%, respectively.
Mixed asset funds reported average returns of 13.37%, while Hong Kong dollar market funds and US dollar market funds—the worst performers over the three quarters, reported 0.73% and 1.08%, respectively. No funds reported losses during the nine-month period.
Although the MPF seems poised for a banner year, there are risk factors. . “The US, Japan, and Europe have started to wind down monetary-easing policies. The US and North Korean relationship remains tense,” Kenrick Chung Kin-keung, director of MPF business development at Convoy Financial Services told the South China Morning Post. Kin-keung also warned that next week’s Communist Party congress—which occurs every five years— “may announce some new policies that could affect market sentiment.”
“Overall, market sentiment remains positive, but investors should beware that the rally could turn around anytime soon,” he said. “I would recommend MPF members continue to invest in Asian and European equity funds.”