Bonds have been the best performers in the Mandatory Provident Fund (MPF) this year, yielding an average 4.4 per cent return as of the end of last month.
"This is a year for bonds," says Lau Ka-shi, CEO and managing director of Bank Consortium Trust (BCT). "The interest payments for bonds and most bond funds have generated positive returns. In view of the poor performance of equity funds, fund managers of our Hong Kong dollar bond fund have adopted a successful strategy in selecting high quality corporate bonds."
The return on BCT's Hong Kong dollar bond fund is 5.7 per cent and is expected to reach 8 per cent for the entire year, she says.
Returns on equity funds were in negative territory for the first eight months of the year. "The market is still affected by the financial tsunami. The Hang Seng Index has been moving in the range of 19,000 and 23,000 for almost a year. We do not expect equity funds to record any gains this year," she says.
Low euro interest rates have kept money market funds from yielding returns. "This is good when taking into account fees deducted for the administration, funds management and trustees," she says.
The economic outlook on the mainland for next year is positive and the country is likely to become more open for renminbi investment. "Hong Kong is an offshore renminbi market and renminbi investment is likely to support our financial system."
The European debt crisis has raised doubts over the effectiveness of budget-control measures. However, Lau remains optimistic about the market's performance next year and believes bond funds will continue to do well. Although the launch date of the MPF Schemes Amendment Bill 2009 has yet to be finalised, BCT has prepared systems enhancement and changes in related documentation, Lau says. BCT has launched several initiatives to improve communication with its members, including opening a new retirement website for investor education and planning.
"With the new member-choice arrangement, we have to extend our services to members by reaching out to them directly," Lau says.
BCT has been expanding its telemarketing team and business development division, and increasing staff to promote built-in automation in its operation and administration systems, Lau says.
The MPF Schemes Amendment Bill, which was passed in July last year, is expected to allow employees to transfer their contributions to the MPF provider of their choice every year.
