How many MPFs can beat the market?
In the previous post, I have shared with you how to scrape MPF performance data in AAStocks. I have also raised some questions on the claims from MPF agents that their fund managers can beat the market: Is it true? Am I better off by investing in low-fee and passive funds?
In the post, I will try to answer that by comparing the risk-adjusted return on 2 market indexes, SPY and HSI using Sharpe Ratio using data from 31/01/2019 – 31/01/2020 since AAStocks MPF data is up to 31/01/2020.
Sharpe Ratio is calculated as 
- 31/01/2019 – 31/01/2020 pricing data is downloaded.
- Then daily return is calculated based on adj. close price.
- Calculate the standard deviation of daily return.
- Multiply it by the square root of 252 to get the yearly standard deviation of return.
- To calculate the year return, just calculate the percentage difference between 31/01/2020 and 31/01/2019.
Using Yahoo Finance Data, SPY Sharpe Ratio is 1.85
| Std of Return | Std of Return Year | Yearly Return | Sharpe Ratio |
| 0.007381527691 | 0.1171781194 | 0.2369315385 | 1.851297321 |
This is the Sharpe Ratio of HSI: -0.46
| Std of Return | Std of Return Year | Yearly Return | Sharpe Ratio |
| 0.01015362259 | 0.1611837617 | -0.05344337156 | -0.4556499413 |
Observations
- Only 2 out of 503 MPFs can beat U.S. Index in the same period.
- A few MPFs can beat HSI in the same period. While HSI is loss-making, those MPFs show a decimal point return. The illusion of beating HSI is probably due to time delay in the valuation of MPFs.
- Bonds perform better (risk-adjusted) when the market is down.
- You are better off by investing in low fee, index-tracking funds.
- Allocate more percentage of bond funds against equity funds if you are pessimistic on the market and vise versa.
If you are interested in data and the reasonings behind, please read the followings:
Data
Can MPF beat SPY risk-adjusted return? Let’s look at the top 20 MPF sorted by Sharpe Ratio.
| provider | Constitutent Fund | Type | Price | 1 year return | 6 month return | 3 month return | 1 month return | year to date return | risk | sharp ratio | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 193 | HSBC Mandatory Provident Fund – SuperTrust Plus | Age 65 Plus Fund | Mixed Assets | 12.6702020/01/31 | 8.57 | 3.34 | 1.36 | 1.12 | 1.12 | 3.15 | 2.085714 |
| 179 | Hang Seng Mandatory Provident Fund – SuperTrus… | Age 65 Plus Fund | Mixed Assets | 12.6702020/01/31 | 8.57 | 3.34 | 1.36 | 1.12 | 1.12 | 3.15 | 2.085714 |
| 239 | Manulife Global Select (MPF) Scheme | Manulife MPF European Equity Fund | Equity | 11.9522020/01/31 | 21.17 | 8.74 | 4.83 | -1.99 | -1.99 | 11.84 | 1.619088 |
| 359 | SHKP MPF Employer Sponsored Scheme | Manulife Career Average Guaranteed Fund – SHKP | Guaranteed | 13.3742020/01/31 | 6.27 | 1.90 | 0.80 | 1.38 | 1.38 | 2.77 | 1.541516 |
| 267 | MASS Mandatory Provident Fund Scheme | US Equity Fund | Equity | 25.4332020/01/31 | 23.08 | 7.25 | 9.57 | 3.77 | 3.77 | 13.76 | 1.531977 |
| 146 | Fidelity Retirement Master Trust | Global Equity Fund | Equity | 29.2202020/01/31 | 17.52 | 7.62 | 4.66 | -0.88 | -0.88 | 10.64 | 1.458647 |
| 114 | BOC-Prudential Easy-Choice Mandatory Provident… | BOC-Prudential North America Index Tracking Fund | Equity | 22.0512020/01/31 | 18.85 | 6.92 | 6.05 | -0.19 | -0.19 | 11.87 | 1.419545 |
| 203 | Sun Life MPF Basic Scheme | Sun Life MPF Basic Scheme International Equity… | Equity | 23.0402020/01/31 | 17.01 | 7.41 | 4.58 | -0.86 | -0.86 | 10.61 | 1.414703 |
| 210 | Sun Life MPF Comprehensive Scheme | Sun Life MPF Comprehensive Scheme Internationa… | Equity | 21.4102020/01/31 | 16.93 | 7.37 | 4.59 | -0.83 | -0.83 | 10.62 | 1.405838 |
| 175 | Hang Seng Mandatory Provident Fund – SuperTrus… | North American Equity Fund | Equity | 18.5202020/01/31 | 18.19 | 7.42 | 5.83 | -0.05 | -0.05 | 11.95 | 1.354812 |
| 189 | HSBC Mandatory Provident Fund – SuperTrust Plus | North American Equity Fund | Equity | 18.5202020/01/31 | 18.19 | 7.42 | 5.83 | -0.05 | -0.05 | 11.95 | 1.354812 |
| 88 | BEA (MPF) Master Trust Scheme | BEA (MPF) North American Equity Fund | Equity | 21.4662020/01/31 | 17.83 | 7.53 | 5.43 | -0.33 | -0.33 | 11.70 | 1.352991 |
| 394 | Principal MPF – Smart Plan | Principal Dynamic Global Equity Fund | Equity | 14.7602020/01/31 | 16.04 | 7.03 | 4.38 | -1.01 | -1.01 | 10.66 | 1.317073 |
| 385 | Principal MPF – Simple Plan | Principal Dynamic Global Equity Fund | Equity | 13.3802020/01/31 | 16.05 | 7.04 | 4.37 | -1.04 | -1.04 | 10.67 | 1.316776 |
| 158 | Fidelity Retirement Master Trust | Hong Kong Bond Fund | Bond | 13.2792020/01/31 | 5.72 | 2.09 | 1.14 | 1.49 | 1.49 | 2.83 | 1.314488 |
| 333 | Allianz Global Investors MPF Plan | Allianz Flexi Balanced Fund – Class T | Mixed Assets | 24.8602020/01/31 | 5.83 | 2.56 | 0.89 | -0.36 | -0.36 | 3.03 | 1.264026 |
| 321 | Allianz Global Investors MPF Plan | Allianz Oriental Pacific Fund – Class B | Mixed Assets | 28.6702020/01/31 | 19.51 | 13.95 | 2.28 | -4.34 | -4.34 | 14.31 | 1.223620 |
| 320 | Allianz Global Investors MPF Plan | Allianz Oriental Pacific Fund – Class T | Mixed Assets | 28.7102020/01/31 | 19.48 | 14.02 | 2.35 | -4.30 | -4.30 | 14.31 | 1.221523 |
| 176 | Hang Seng Mandatory Provident Fund – SuperTrus… | Core Accumulation Fund | Mixed Assets | 19.6602020/01/31 | 10.70 | 5.70 | 2.45 | -0.41 | -0.41 | 7.17 | 1.213389 |
| 190 | HSBC Mandatory Provident Fund – SuperTrust Plus | Core Accumulation Fund | Mixed Assets | 19.6602020/01/31 | 10.70 | 5.70 | 2.45 | -0.41 | -0.41 | 7.17 | 1.213389 |
Answer: Only two out of 503 MPFs beat SPY risk-adjusted return and they are low absolute return funds.
There are of course imperfections in the analysis. For example, only one-year historical data is considered; the U.S. market performs exceptionally well in the year 2019; the Risk-Free rate can be more carefully set, time delay in MPF valuation, etc. But I would argue, this is not too far from the real picture. Maybe there are a few MPF that can beat the market if we adjust for more factors.
How about HSI? We cannot use the above table to compare with HSI since all of the MPFs are international funds or U.S. funds. We need to compare HSI with MPFs operate in the Hong Kong market.
Here are the top 20 MPFs ranked by Sharpe Ratio:
| provider | Constitutent Fund | Type | Price | 1 year return | 6 month return | 3 month return | 1 month return | year to date return | risk | sharp ratio | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 158 | Fidelity Retirement Master Trust | Hong Kong Bond Fund | Bond | 13.2792020/01/31 | 5.72 | 2.09 | 1.14 | 1.49 | 1.49 | 2.83 | 1.314488 |
| 258 | Manulife Global Select (MPF) Scheme | Manulife MPF Hong Kong Bond Fund | Bond | 14.8542020/01/31 | 5.35 | 1.73 | 0.97 | 1.72 | 1.72 | 3.00 | 1.116667 |
| 307 | Principal MPF Scheme Series 800 | Principal Hong Kong Bond Fund – Class N | Bond | 11.1712020/01/31 | 3.80 | 1.41 | 0.82 | 1.52 | 1.52 | 2.25 | 0.800000 |
| 70 | BCT (MPF) Pro Choice | BCT (Pro) Hong Kong Dollar Bond Fund | Bond | 1.2222020/01/31 | 4.19 | 1.83 | 1.28 | 1.72 | 1.72 | 2.76 | 0.793478 |
| 213 | Sun Life MPF Comprehensive Scheme | Sun Life MPF Comprehensive Scheme US & Hong Ko… | Equity | 15.9002020/01/31 | 9.13 | 2.51 | 2.25 | -2.99 | -2.99 | 12.14 | 0.587315 |
| 205 | Sun Life MPF Basic Scheme | Sun Life MPF Basic Scheme US & Hong Kong Equit… | Equity | 15.8402020/01/31 | 9.02 | 2.46 | 2.19 | -3.00 | -3.00 | 12.16 | 0.577303 |
| 371 | Sun Life Rainbow MPF Scheme | Sun Life MPF Hong Kong Dollar Bond Fund – B | Bond | 1.4742020/01/31 | 3.22 | 1.10 | 0.68 | 1.53 | 1.53 | 2.56 | 0.476563 |
| 372 | Sun Life Rainbow MPF Scheme | Sun Life MPF Hong Kong Dollar Bond Fund – A | Bond | 1.4222020/01/31 | 3.01 | 1.00 | 0.62 | 1.51 | 1.51 | 2.56 | 0.394531 |
| 425 | Sun Life MPF Master Trust | Schroder MPF Hong Kong Portfolio – Class B | Equity | 38.3702020/01/31 | 2.05 | -0.90 | 0.34 | -5.49 | -5.49 | 16.10 | 0.003106 |
| 426 | Sun Life MPF Master Trust | Schroder MPF Hong Kong Portfolio – Ordinary | Equity | 36.6502020/01/31 | 1.83 | -1.00 | 0.30 | -5.49 | -5.49 | 16.10 | -0.010559 |
| 145 | China Life MPF Master Trust Scheme | China Life Hong Kong Equity Fund | Equity | 16.4282020/01/31 | 1.47 | -1.57 | -0.11 | -5.93 | -5.93 | 15.30 | -0.034641 |
| 209 | Sun Life MPF Basic Scheme | Sun Life MPF Basic Scheme Hong Kong Equity Por… | Equity | 44.8202020/01/31 | 1.43 | -1.30 | 0.16 | -5.58 | -5.58 | 15.97 | -0.035692 |
| 219 | Sun Life MPF Comprehensive Scheme | Sun Life MPF Comprehensive Scheme Hong Kong Eq… | Equity | 43.4002020/01/31 | 1.33 | -1.34 | 0.16 | -5.57 | -5.57 | 15.94 | -0.042033 |
| 171 | Haitong MPF Retirement Fund | Haitong Hong Kong SAR Fund – Class T | Equity | 63.9602020/01/31 | 1.23 | -3.05 | -2.68 | -6.45 | -6.45 | 14.57 | -0.052848 |
| 138 | My Choice Mandatory Provident Fund Scheme | My Choice Hong Kong Equity Fund | Equity | 15.9942020/01/31 | 1.12 | -2.94 | -0.26 | -6.05 | -6.05 | 15.64 | -0.056266 |
| 172 | Haitong MPF Retirement Fund | Haitong Hong Kong SAR Fund – Class A | Equity | 57.6602020/01/31 | 1.14 | -3.09 | -2.70 | -6.47 | -6.47 | 14.57 | -0.059025 |
| 163 | Fidelity Retirement Master Trust | Hong Kong Equity Fund | Equity | 34.6482020/01/31 | 0.72 | -2.06 | -0.35 | -6.08 | -6.08 | 15.47 | -0.082741 |
| 381 | Sun Life Rainbow MPF Scheme | Sun Life MPF Hong Kong Equity Fund – B | Equity | 6.3422020/01/31 | 0.76 | -3.54 | -2.65 | -6.16 | -6.16 | 14.20 | -0.087324 |
| 56 | BCT (MPF) Industry Choice | BCT (Industry) Hong Kong Equity Fund | Equity | 4.1902020/01/31 | 0.47 | -2.20 | -0.45 | -6.09 | -6.09 | 15.40 | -0.099351 |
| 382 | Sun Life Rainbow MPF Scheme | Sun Life MPF Hong Kong Equity Fund – A | Equity | 6.1172020/01/31 | 0.56 | -3.64 | -2.70 | -6.18 | -6.18 | 14.20 | -0.101408 |
All of them beat HSI Sharpe Ratio at a first glance since HSI is loss-making while those funds are not. But a few of them included equity in U.S. and Bonds which probably are not suitable for comparison. And the remaining equity funds show a decimal point return. There may be a time delay in the valuation.
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