As members become more familiar with the component funds under the Default Investment Strategy (DIS), more members are allocating funds to these so-called "lazy funds". As of March 2024, about 30% of Mandatory Provident Fund (MPF) accounts (3.31 million accounts) have investments in component funds under DIS. While DIS funds invest in both equities and bonds, categorizing them as mixed asset funds, their investment proportions and performance differ from other mixed asset funds, providing members with further investment opportunities.
DIS allocates equity and bond proportions based on age
DIS consists of a "Core Accumulation Fund" and an "Age 65 Plus Fund", allocating different proportions to these two funds based on the member's age. The Core Accumulation Fund invests around 60% in higher-risk assets (mainly global equities) and the rest in lower-risk assets (mainly global bonds). In contrast, the Age 65 Plus Fund only invests 20% in higher-risk assets, with the remainder in lower-risk assets. Before age 50, a member’s entire investments are allocated to the Core Accumulation Fund, gradually reducing and passing across to the Age 65 Plus Fund between the ages of 50 and 64. From age 64, all investments have been transferred to the Age 65 Plus Fund. Generally, changes in proportions occur on the member's birthday; if the birthday falls on a non-working day, adjustments are made on the next working day.
Cannot determine mixed asset fund proportions by name alone
Other mixed asset fund categories are classified based on different equity proportions, ranging from 21-40% equity, 41-60% equity, 61-80% equity, to 81-100% equity. Due to varying definitions of equity proportions in mixed asset funds used by different trustees, members should not rely solely on fund names to determine the equity proportions. One needs to look more closely at the actual asset distribution to fully understand the equity allocation.
Recent performance of DIS funds
As of July 31, 2024, comparing the annualized returns over the past five-year, funds under DIS have shown higher investment returns relative to other mixed asset funds. The return range for the Core Accumulation Fund has been between 5.6% to 6.8% per annum, while the return range for mixed asset funds with 61-80% equity proportion has been 0.7% to 3.8% per annum. Over the same five-year period, the return range for the Age 65 Plus Fund has been between 0.8% to 2.0% per annum, while the return range for mixed asset funds with 21-40% equity proportions has been -0.5% to 0.7% per annum. Differences in returns primarily stem from the higher proportion of investments in various global equity markets under DIS, with lower investment weights in the Hong Kong market benefiting the prominent performance of global equity in recent years.
Expense ratio causing return disparities
Another reason for the disparities in investment returns is the lower expense ratio of DIS funds. The average expense ratio for funds under DIS is 0.78%, while the average expense ratio for other mixed asset funds is 1.56%, representing a significant difference that crucially impacts performance. This is a historical issue, as other mixed asset funds were established early in the development of the MPF system with generally higher fees, whereas DIS was introduced in April 2017 with a fee cap, ensuring that the management fee, along with recurrent actual expenses, does not exceed 0.95%.
Despite being dubbed a "lazy fund," we encourage members to actively understand the operations of the funds under DIS and decide whether to invest based on their own investment goals and risk tolerance.
| Title | File Type | File Size |
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| DIS differs from other mixed asset funds | .3 MB |
