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Hong Kong Pension System Charges Premiums for Cheap Index Funds

  • Management fees leave MPF funds vastly underperforming ETFs
  • Program assets leave workers ‘not enough’ for retirement
Unless You're a Tycoon, Life in Hong Kong is Harder Than Ever
Photographer: Billy H.C. Kwok/Bloomberg

Hong Kong’s pension system has left savers paying fees for stock-index funds that are a multiple of those investors can get in the open market, contributing to a crisis of poor retirement preparation for millions of workers.

Take the biggest fund run by HSBC Holdings Plc that tracks the Hang Seng Index. With HK$35.5 billion ($4.5 billion) in assets, it’s the largest in Hong Kong’s Mandatory Provident Fund system. Savers pay an annual fee of 0.80%, compared with the 0.09% cost of an exchange-traded fund that tracks the same index. And HSBC’s offering is one of the lowest-cost available.