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As at 31 October 2008, there are 38 MPF schemes in the market that provide an aggregate of 340 constituent funds. On average, scheme members can choose between about 8 types of funds within an MPF scheme.
The law requires all MPF schemes to offer at a minimum, a capital preservation fund (CPF) in each scheme. In order to meet the different risk tolerance levels of scheme members, all MPF schemes in the market provide other investment fund choices in addition to a CPF. The range of the funds on offer may go from low risk steady growth options, to higher risk (potentially) higher growth options.
The following types of funds are available in many MPF schemes:
Money Market Fund
- Capital Preservation Fund
Each MPF scheme is required by law to provide a capital preservation fund (CPF) which invests like a money market like fund. It invests exclusively in Hong Kong-dollar assets either in short-term bank deposits or high quality debt securities. Administrative expenses can only be deducted from a CPF when the returns of the fund for the month exceed the monthly savings rate prescribed by the MPFA. The CPF is essentially a money market fund with special mechanism for fund expense deduction.
By the nature of its investment, a CPF is a conservative and low-risk investment product. It should be noted, however, that on some occasions (historically in times of high inflation), the returns of CPF might not be able to beat inflation.
- Money Market Fund
A money market fund invests generally in short-term high quality interest bearing securities, with the aim of earning an interest rate higher than that of savings deposits. The risk of investing in money market fund is generally considered to be low as the fund is generally restricted to investment instruments of short maturity (on average, not over 90 days for the fund).
Click here for an overview of the different types of MPF funds.
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