No Time to Pick Your MPF Funds? Default Investment Strategy Has You Covered

Many Hong Kong employees don’t have the time or expertise to actively manage their MPF investments. For these individuals, the Default Investment Strategy (DIS), commonly known as the “Lazy Fund”, offers a simple, ready-made option.

What is the Default Investment Strategy?

Introduced by the MPFA in 2017, the DIS is a standardized investment approach that all MPF trustees must provide. If an MPF member doesn't specify an investment preference, their contributions are automatically allocated to the DIS.

Three Key Features of the Default Investment Strategy

1. Invest in Global Market for Risk Diversification

The DIS is made up of two mixed assets funds, namely the Core Accumulation Fund and the Age 65 Plus Fund. Both funds adopt a globally diversified investment strategy, spreading assets across different classes including stocks, bonds, and money market instruments. These diversification helps mitigate risks. For members who prefers a hands-off approach, the DIS offers a straightforward way to stay invested while adapting to market fluctuations.

2. Automatic De-risking with Age

As members age, their risk tolerance typically decreases. The DIS automatically adjusts the investment portfolio's risk based on age, ensuring a gradual shift to lower-risk asset:

• Before age 50: All MPF contributions are invested in the Core Accumulation Fund, which invests about 60% of its assets in global stocks, carrying higher risk.
• Ages 50-64: Starting at 50, the default strategy gradually reduces holdings in the higher-risk Core Accumulation Fund while increasing holdings in the lower-risk Age 65 Plus Fund.
• After age 64: All assets are invested in the Age 65 Plus Fund, which only invests about 20% in stocks, with the remainder in lower-risk bonds.

This "automatic de-risking" mechanism helps safeguard members from market volatility as they near retirement.

3. Fee Caps

Both component funds of the DIS have fee caps, with management fees not exceeding 0.75% of the fund's net asset value annually, and other recurring expenses not exceeding 0.2%.

Data shows that as of June 2024, over 30% of MPF accounts have opted for the DIS, reflecting strong trust in this investment approach. However, members should be aware of the inherent risks. While the DIS offers a convenient investment option, it doesn't guarantee capital preservation or positive investment returns. Since both the Core Accumulation Fund and Age 65 Plus Fund are mixed asset funds, their performance will be affected by market fluctuations. Members should carefully assess their retirement goals and risk tolerance before making investment decisions.

Disclaimer: The information, data, and documents provided on this website are for general reference purposes only and should be used as self-help tools. Investment involves risks, and unit prices may fluctuate. Past performance figures shown are not indicative of future performance. BestServe Financial Limited and its content providers are not responsible for any loss or damage caused by reliance on any information or advice made in this website.

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