HONG Kong’s Mandatory Provident Fund (MPF) scheme saw a total return of 19.87% in 2017, driven by the strong performance of mainland China, Hong Kong and Japan equity funds, according to Fidelity International.

With the global stock market rallying in 2017, Hong Kong equity funds saw a significant return rate of 40.09%, followed by a return of 39.96% for Asia ex-Japan equity funds, according to Fidelity. This significantly boosted the overall performance of the MPF scheme as the majority of the MPF assets under management (AUM) are assigned to equity funds.

“About 68% of the HK$800 billion (approx. US$102 billion) MPF AUM is invested in equity funds. This percentage is the highest among similar retirement schemes globally,” says KP Luk, Fidelity International’s head of Hong Kong defined contribution business.

HK dollar money market funds and MPF conservative funds delivered the worst performance in 2017, with returns of 0.46% and 0.14% respectively, according to Fidelity.

The outlook for 2018 remains optimistic. “The tax overhaul in the US, robust domestic activities and accommodative central banks in Europe, improving corporate margins in Japan and resilient growth in Greater China, should all continue to support markets as we enter 2018,” says Terrence Kan, Fidelity International’s client portfolio strategist of regional institutional business, Asia ex-Japan.

“Regardless of the outlook, MPF members should not pay excessive attention to short-term market dynamics only,” Luk says, suggesting that younger MPF members are encouraged to invest in high-return asset classes despite their relatively higher risks.

“With MPF’s very long investment horizon, members are encouraged to focus on the long-term benefits of investing and develop investment strategies that best suit their risk tolerance level and return expectations,” Luk says.