RCM, a specialist retirement fund house in Hong Kong, estimates that Mandatory Provident Fund (MPF) investors have lost on average over 30 percent in 2008 so far as the benefits of international diversification have not proven robust during the financial downturn.

"I expect the MPF to have a low growth next year with equity market slowly picking up and reducing market volatility over the next several months, when investors become accustomed to the constant flow of negative economic news," Mark Konyn, chief executive officer of RCM Asia Pacific, said.

Meanwhile, Reuters quoted Lipper, a fund researcher, as saying in a statement: "Local MPF in November on average lost 1.36 percent. It is the seventh consecutive month's drop in earnings and the accumulative decline has reached nearly 28 percent."

In July and August, RCM conducted a survey on how MPF investors were considering the prospect of greater choice in their investment. As many as 1,400 of the 10,000 MPF investors on the mailing list completed the questionnaire. The respondents were working population aged between 24 and 64.

The survey results indicate that about half of the respondents were not aware that there was a possibility that greater choice could be made under the MPF system. Only 44 percent indicated that they might take action as soon as they have the right to do so.

Fifty-six percent said they are unlikely to take actions immediately primarily due to lack of time and knowledge of other schemes available.

"We would expect general awareness to increase of the need to save for retirement over the next few critical years," Konyn said.

The survey results also indicate that investors generally do not consolidate their preserved accounts, which most likely makes it difficult for them to adjust their strategy on entire MPF savings.

For example, RCM noted, there are 2.2 million employees in Hong Kong but there are over 2 million preserved accounts.

On the fund selection front, respondents show that fund performance is the most important criteria, followed by the range of fund choices and level of management fees, respectively.

"There are a small number of third-party asset consultants and fund research agencies in Hong Kong providing an objective assessment of each individual fund's characteristics and performance," Konyn said. "We would expect these third parties to gain prominence as MPF members become more familiar with the concept of greater choice," he added.

The survey also covers investors' fund preferences. 74 percent of respondents prefer global equity funds and 70 percent mixed asset or balanced funds, followed by 67 percent for regional equity funds.

"Although the global financial crisis has made it difficult for investors to diversify their investments as all stock markets were hit by the crisis, we believe that the long-term benefits of diversification are still very much relevant," Konyn said.

(HK Edition 12/11/2008 page2)