Hong Kong, Hong Kong

Mercer launches MPF Market Shares and Net Fund Inflow Report to track HK retirement investment savings trends

Report shows significant inflows into various DIS funds and outflows from mixed asset funds

Hong Kong, Aug 17 2017 Mercer, a global consulting leader in advancing health, wealth and career, and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), today announced the findings of the Mercer MPF Market Shares and Estimated Net Fund Inflow Report as at 30 June 2017. The report, which measures market share by MPF fund asset size and net monthly inflows,  estimates that total assets under management (AUM) in the MPF system rose to a new high of HKD 745.7 billion in the second quarter of 2017, a gain of HKD 44.6 billion or 6.4% from the first quarter.

As the first  report recording  MPF inflows following the launch of the “Default Investment Strategy” (DIS) in April 2017, the Mercer MPF Market Shares and Estimated Net Fund Inflow Report as at 30 June 2017 shows significant inflows into various DIS funds and significant outflows from mixed asset funds in Q2 2017. The DIS addresses scheme members’ concerns about the high fee levels of MPF funds and the difficulties in making fund choices.

The Mercer report initiative follows the launch of the Mercer MPF Satisfaction Index in April 2017, with both sources providing data on market reaction to gain insights useful for companies and government organizations about the MPF system.

Significant Inflows into Default Investment Strategy (DIS) in Q2 2017

The second quarter of 2017 saw significant net inflow into various DIS funds. A total of HKD 15,289 million in inflows into the DIS was observed, comprising HKD 13,196 million to the Core Accumulation Fund (CAF) and HKD 2,092 million into Age 65 Plus Fund. DIS funds saw a monthly net inflow of HKD 5,050 million, the largest net inflow among all categories (others include equity funds, mixed asset funds, bond funds, cash funds, guaranteed funds, other unclassified funds), representing a 130.8% of the MPF total net inflow.    

Two main factors could have contributed to this inflow: one is the accrued benefits in the pre-DIS default funds automatically invested through DIS after April 1 2017 due to the absence of valid investment instructions; second is that HSBC and Hang Seng have converted four existing Stable Growth Funds into the CAF funds, there is a bookkeeping change showing outflow from mixed asset funds and inflow to CAF funds.

“With the launch of DIS, there was a significant net inflow into various DIS funds and significant outflow from mixed asset funds.  As of Jun 30, 2017, the DIS fund assets were about HK$15 billion (2.1% of the total market). The actual asset size of DIS funds may not seem significant yet but we still see the DIS as a good default option for members. Of course, this may also reflect that more members care about their MPF investments and make active investment decisions,” said Billy Wong, Wealth Business Leader, Hong Kong, China, Korea.

In June 2017, the Mercer MPF Satisfaction Index has shown an increase in satisfaction towards the DIS compared to May 2017.

Providers ranking, movements and net inflows by asset class and type of fund

In Q2, HSBC/ Hang Seng (28.6%) remains the top provider in terms of assets, followed by Manulife (22.2%), AIA (9.5%) and BOCI-Prudential (7.6%). Sun Life (6.1%) continues to demonstrate a strong growth momentum and rose to the 5th place, narrowly overtaking Principal with also 6.1%. The top 10 providers account for 96% of total MPF assets.

However, on a 10-year basis, the Top 10 rankings in terms of MPF market share have actually changed quite a bit. HSBC/ Hang Seng’s market share has dropped, while Manulife and Sun Life saw significant increases and AIA remained more or less the same.

Largest providers – Rank by AUM and Change in % of Asset as % of MPF total over the past 10 years

“Movements in rankings and inflows/outflows observed by MPF providers signify the proactive approach taken by MPF subscribers to look for better service, which is encouraged and in turn would prove beneficial to subscribers themselves as different providers strive to improve their MPF offerings to stay competitive,” said Billy Wong.

In the second quarter of 2017, net inflows into equity funds continued to be lower than in previous periods, while there were higher inflows into bond funds. “This seems to reflect a cautious mindset of MPF members towards volatile equity markets. In Q2, we saw a net outflow of HKD 209 million from Hong Kong equity index tracking funds. Over time, these data will aggregate to reveal trends in the market and provide useful insights,” added Billy Wong.

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About The Mercer MPF Market Shares and Estimated Net Fund Inflow Report

The Mercer MPF Market Shares and Estimated Net Fund Inflow Report presents information and analysis on market shares by different service providers in the MPF system, including product providers, trustees, administrators, custodians and investment managers. The report also includes commentaries on market development, trends and rankings of these service providers. MPF service providers and intermediaries can access this report through subscriptions.

Note to editors

Please note that the calculations of net fund inflows are Mercer’s, and have not necessarily been verified with the product providers. While every reasonable effort has been made to ensure accuracy, Mercer does not accept any responsibility for the figures. Net inflow calculations may be particularly subject to error when markets are volatile, as they will be sensitive to the precise timing of the inflows and daily price changes.

MPF fund size data is primarily based on information contained in the various fund fact sheets that are provided to MPF members. In a few cases, where figures were not available for the target date, estimations were made based on past trends.

The data collected by Mercer accounts for 99% of the total MPF system (based on AUM). Mercer was unable to obtain current data for the BCOMM, SHKP, Mass and Haitong schemes at the time of producing this report. These were estimated from performance data and past inflow trends.

Mercer’s estimated figure for total assets in the MPF system is HKD 745.7 billion (last quarter HKD 701.1 billion), with total net inflows during the quarter of HKD 11.4 billion (last quarter HKD 12.6 billion).

The MPFA’s figures were not available at the time of this report.

All data is shown as at 30 June 2017. Please note that the figures may not add exactly to the totals due to rounding.

About Mercer

Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 22,000 employees are based in 43 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With more than 60,000 colleagues and annual revenue over $13 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit Follow Mercer on Twitter @Mercer.