1. Topic: How to choose the funds of MPF?
Group 2
Topic:
How to choose
the funds of MPF?

2. Agenda Objective Introduction to MPF
The considerable factors in choosing MPF funds
Cases of Fidelity to analyze the risk and return of each fund
Conclusion

3. Objective

4. Objectives Give a better understanding of the details of MPF
Introduce them with different fund of MPF
Suggest them to choose the fund base on risks and returns

5. Introduction to MPF

6. Introduction to MPF Before MPF 1/3 of the workforce had retirement
protection
Problem of Aging Population
1995 enacted the Mandatory Provident Fund (MPF) Schemes Ordinance

7. Introduction to MPF 1 December 2000  fully implemented
After the implementation of MPF
 90% of the working population enjoys
retirement protection
Aims: provide retirement protection

8. Key Features of the System
Targets
 18 and 65 employed and self-
employed
 full-time and part-time employee
employed for 60 days or more
 causal employee (construction and
catering industries) employed for less
than 60 days

9. The considerable factors in choosing MPF funds

10. The considerable factors in choosing MPF funds
a) Investment Target
b) Risk Tolerance
c) Estimation on Retirement Age
d) Characteristics of Funds
e) Performance of the Funds
f) Types of Funds and Portfolio Ratio
g) Financial and Family Situation
h) Fees and Charges

11. Investment Target
There should have a clear investment target in MPF investment
Start from the investment target and think about suitable MPF investment strategy
Scheme members can decide using a more radical or conservative target strategy
More well-to-do retirement lifehave more savings e.g. voluntary savings
Do whatever everybody does to change their investment portfolio

12. Risk Tolerance
Choose different MPF investment portfolios according to different ages and the extent of individual risk tolerance
Young scheme membersthe equal cost method of MPF Funds can ride out the short-term ups and downs of the investment and the risk tolerance could be higher e.g. equity fund and balanced fund
Retirementinvest on low-risk funds
Scheme members should know more about the funds and choose the most suitable investment portfolio

13. Estimation on retirement age
Estimate their retirement ages in order to have proper MPF investment planning
Withdraw their accrued benefits in a lump sum at the age of 65 according to the MPF scheme
Employees’ retirement lives can last for more than yearsprepare enough savings
Retire earlierretirement lives would be longer and more savings are needed
Retire earlier plan financial strategies as soon as possible and prepare well MPF investments e.g. voluntary contributions or choose proper investment portfolios

14. Characteristics of Funds
Know well the characteristics of each fund in choosing investment portfoliosmake wise investment decisions
Capital Preservation Fund, the Guaranteed Fund, the Money Market Fund, the Bond Fund, the Balanced Fund, the Equity Fund and the Index-tracking Fund
Each funds have various characteristics, including investment strategies, risks and returns, investment items and elements, and other clauses
Characteristics of funds are all listed in fund description documents
Seek advice from MPF trustees in case of any queries

15. Performance of the Funds
Review the investment performance of the fund
whether need to adjust the investment strategies
Publications of the data about the MPF investment return
provided by different organization
The investment return
price of the funds
market fluctuations of the market
e.g. more units of funds → when the price is low
fewer units of funds → when the price is high

16. Performance of the Funds
The characteristic of the investment of the MPF
long-term investment
short-term fluctuations in the market → a limited effect on the overall return of the MPF investment
should not over emphasize the short-term market performance

17. Types of Funds and Portfolio Ratio
Funds portfolio:
grasp different investment opportunities
spread the investment risk
Different MPF funds → different characteristics
e.g. Capital Preservation Fund (CPF)
invest in bank deposit and short-term bonds
have lower risk
Equity Fund
invest in local or international equity
involve high risk

18. Financial and Family Situation
Depends on their financial and family situation
e.g. single young member
→ fewer family burdens
→ can contribute more MPF (voluntary contribution) at this stage, or invest funds with higher return
→ can have more retirement protection
as age grow
→ family burden increase
→ should invest in balanced or conservative fund to prevent high risk

19. Fees and Charges
People concentrate on the past experience & the expected return
Fees and charges
→ also important
→ affect the return of the MPF investment
→ should aware the information about the charges
Objective standard of the charges that can reflect the cost of investment
→ charges: main reference for choosing the investment mix and calculating the return

20. Cases of Fidelity to analyze the risk and return of each fund

21. Cases of Fidelity to analyze the risk and return of each fund
a) Hong Kong Equity Fund
b) Global Equity Fund
c) Balanced Fund
d) Hong Kong Bond Fund
e) World Bond Fund
f) Capital Preservation Fund (CPF)

22. Hong Kong Equity Fund
Launch date :01/12/2000
Investment Objectives & Strategy:
aims to produce returns that are related to those achieved on the major stock market indices of Hong Kong
to focus the investments into the equity markets and companies of Hong Kong and Greater China
growth-oriented

23. Hong Kong Equity Fund Fund Asset Allocation as of 30/09/2005
95.6% Hong Kong Equities
4.4% Cash & others
Source: Fidelity Investments, NAV to NAV

24. Analysis of Hong Kong Equity Fund

25. Hong Kong Equity Fund Analysis of Hong Kong Equity Fund
price has risen from $ to $ of 7.72%
gains a profit from the launch date %
The risk is high
the price has a few declines in 1/11/2005
still have growth trend

26. Global Equity Fund Launch date : 30/6/2003
Investment Objectives & Strategy:
aims to produce returns that are related to those achieved on the major world stock market indices
to focus investments into global equity markets
growth-oriented

27. Global Equity Fund Fund Asset Allocation as of 30/09/2005
0.79% Hong Kong Equities
0.08% Cash & Others
10.66% Japan Equities
6.51% other Asia
Pacific Equities
50.98% US Equities
30.98% European Equities
Source: Fidelity Investments, NAV to NAV

28. Analysis of Global Equity Fund

29. Global Equity Fund Analysis of Global Equity Fund
the price is $ and grows to $13.788
growth rate is 7.78%
gains a profit from the launch date %
the price raise 0.06% more than Hong Kong Equity Fund
Global Equity Fund has higher risk
the price has a few declines, but the overall price has been increased

30. Balanced Fund Launch Date: 01/12/2000
Investment Objectives & Strategy:
aims to build capital value over the long-term by maintaining a balanced, global portfolio of bond funds and equity funds with a bias towards Hong Kong
for investors who are willing to accept medium-term volatility to achieve higher returns

31. Balanced Fund Fund Asset Allocation as of 30/09/2005
24.53% Hong Kong Equities
11.18% Japan Equities
10.79% other Asia
Pacific Equities
13.12% US Equities
15.15% European Equities
20.25% Bonds
4.98% Cash & Others
Source: Fidelity Investments, NAV to NAV

32. Analysis of Balanced Fund

33. Balanced Fund Analysis of Balanced Fund
more diversified including the world's stock and bond markets
Price: a bit fluctuated
moved within $ and $ (range: $0.876)
Since stock price is so fluctuated, the higher the proportion invested in stock, the higher the risk
about 75% of asset is allocated to the equities
need to bare a higher risk
but may have higher return

34. Hong Kong Bond Fund Launch Date: 30/06/2003
Investment Objectives & Strategy:
aims to produce returns that are related to the major bond market indices
to achieve stable returns with a minimum capital risk
invests primarily in the bond markets of the world with a focus on HK dollar denominated bonds and issuers.
conservative investment

35. Hong Kong Bond Fund Fund asset allocation as of 30/09/2005
82.89% Hong Kong Bonds
17.11% Cash & Others
Source: Fidelity Investments, NAV to NAV

36. Analysis of Hong Kong Bond Fund

37. Hong Kong Bond Fund Analysis of Hong Kong Bond Fund
Price: lower than $10 & decrease slowly
In 2005, decreased every month except May
$9.525(01/01/2005) $9.213 (01/12/2005) 
the variation is not large
moved within $9.15 and $9.55 (range: $0.4 )
growth –oriented funds like Hong Kong Equity Fund($11-$13, range: $2.0)
Hong Kong Bond Fund is very conservative and stable

38. World Bond Fund Launch Date: 30/06/2003
Investment Objectives & Strategy:
aims to produce returns that are related to the major bond market indices
to achieve stable returns with a minimum capital risk
invests primarily in the bond markets of the world to limit the volatility of returns in the short term
Conservative investment

39. World Bond Fund Fund asset allocation as of 30/09/2005
99.94% Global Bonds
0.06% Cash & Others
Source: Fidelity Investments, NAV to NAV

40. Analysis of World Bond Fund

41. World Bond Fund Analysis of World Bond Fund
Price: higher than $10, decrease slowly
in 2005, decrease every month except May and September
$ (01/01/2005)$ (01/12/2005)
the variation is not so large
moved within $10.2 and $10.9 (range: $0.7)
growth –oriented funds like Hong Kong Equity Fund ($11-$13, range: $2.0)
World Bond Fund is very conservative and stable

42. Capital Preservation Fund (CPF)
Launch Date: 01/12/2000
Investment Objectives & Strategy:
aims to provide a position return each month equal to or better than the Hong Kong savings account rate
invests primarily in Hong Kong Dollar short-term deposits and money market instruments to ensure the minimal risk to the capital
conservative investment

43. Capital Preservation Fund (CPF)
Fund asset allocation as of 30/09/2005
88.49% HKD Money Market Instruments
11.51% HKD Fixed Deposits
Source: Fidelity Investments, NAV to NAV

44. Capital Preservation Fund (CPF)
Analysis of Capital Preservation Fund

45. Capital Preservation Fund (CPF)
Analysis of Capital Preservation Fund
Price: continuous growth
beneficial for investors
the rate of return in Fidelity is higher than the average bank savings rate in banks
 very conservative
the risk is relatively low, the return may be stable
the investment time is short

46. Conclusion

47. MC Questions

48. MC Questions
1) Which of the following is(are) not the factor(s) a scheme member should consider when choosing MPF funds?
a) Investment target and estimation on retirement age
b) Risk Tolerance and performance of the funds
c) Characteristics of funds and fund managers
d) Types of Funds and Portfolio Ratio
e) Financial and Family Situation

49. MC Questions
1) Which of the following is(are) not the factor(s) a scheme member should consider when choosing MPF funds?
a) Investment target and estimation on retirement age
b) Risk Tolerance and performance of the funds
c) Characteristics of funds and fund managers
d) Types of Funds and Portfolio Ratio
e) Financial and Family Situation

50. MC Questions
2) What is/are the characteristic(s) of Hong Kong Equity Fund in Fidelity?
a) Low risk
b) High risk
c) Invests primarily in equities with a bias towards Hong Kong and Greater China
d) Only b) & c)
e) All of the above

51. MC Questions
2) What is/are the characteristic(s) of Hong Kong Equity Fund in Fidelity?
a) Low risk
b) High risk
c) Invests primarily in equities with a bias towards Hong Kong and Greater China
d) Only b) & c)
e) All of the above

52. MC Questions
3) If now, an employee is 21years old and has not married yet, which fund(s) is(are) relatively suitable for him?
a) Hong Kong Equity Fund
b) Conservative Fund
c) Capital Preservation Fund
d) Global Equity Fund
e) Only a) & d)

53. MC Questions
3) If now, an employee is 21years old and has not yet married, which fund(s) is(are) the most suitable for him?
a) Hong Kong Equity Fund
b) Conservative Fund
c) Capital Preservation Fund
d) Global Equity Fund
e) Only a) & d)

54. Member list: 033089 Ng Yuen Ling, Annie 033090 Ng Yuen Ching, Serena
Chan Hing Chung, Dennis
Wong Wing Yin, Joyce
Ng Man Ching, Irene
Ho Yan Lun, Elaine