1 Hong Kong Shue Yan College ECON 310 Financial Institutions in Hong Kong Term Paper 2006 Fall

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Hong Kong Shue Yan College

ECON 310

Financial Institutions in Hong Kong

Term Paper 2006 Fall

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The Comparison between the MPFs provided by

Bank (HSBC) and

Insurance Company (Manulife)

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Section 4, Group 6

• 044012 Christy, Cheung Wai Hung

• 044013 Annie, Chong Suet Yan

• 044018 Roxanne, Yu Kwan Yee

• 044028 Carrie, Ho Ka Lai

• 044040 Quin, Leung Pui Shan

• 044052 Katy, Lee Wai Kit

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Introduction of MPF

pension plan

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What is a pension plan?

– an asset pool

– represent the fastest-growing financial intermediary.

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Reasons pension plan becomes popular

– Life expectancy increase

– Ageing problem

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Type of pension plans

– Private Pension Plans

– Public pension Plan

• Sponsored by a governmental body. e.g., MPF

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Public pension Plan

Mandatory Provident Fund (MPF)

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Key features of the MPF

– Coverage and Exemption

• Coverage: Employee, Employer, Self-Employed Person

• Exempt persons: Domestic employees, Self-employed hawkers;

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– Contributions

• Both employers and employees pay a minimum contribution of 5% of relevant income

• Self-employed persons have to contribute 5%.

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• minimum and maximum levels of relevant income are:– Minimum - HK$4,000 per month

– Maximum - HK$20,000 per month

• can withdraw accrued benefits in a lump sum at the age of 65

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• Immediate Vesting

Contributions paid and investment earnings are fully and vested with the member as accrued benefits.

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• Portability When a member changes job, benefits can be

transferred

• Preservation Benefits will be preserved and became

payable at age of 65 or die

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Description of HSBC and Manulife

Background of HSBC

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Background of HSBC

– one of the world’s largest banking and financial services organizations

– operated in Hong Kong more than 140 years

– has over 9,700 offices in 77 countries and territories

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Background of HSBC

– The leader position in the pension market

– HSBC and subsidiary Hang Seng Bank have secured 400,000 employees for MPF

– 40% targeted market share in the MPF business.

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MPF Product in HSBC

• HSBC offers two master trust schemes

– SuperTrust

– SuperTrust Plus

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SuperTrust MPF Scheme

• members with less investment experience

• investment time frames from short to long term

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SuperTrust MPF Scheme

• 5 different funds

– Capital Preservation Fund (low-risk)– Guaranteed Fund (low-risk) – Balanced Fund (medium-risk) – Growth Fund (high-risk)– Hang Seng Index Tracking Fund (high-risk)

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SuperTrust Plus MPF Scheme

• members with a greater investment knowledge and experience

• In addition to 5 SuperTrust Funds, it offers 5 more funds

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SuperTrust Plus MPF Scheme

– Stable Growth Fund (medium-risk)– Asian Equity Fund (high-risk)– European Equity Fund (high-risk)– Hong Kong Equity Fund (high-risk)– North American Equity Fund (high-risk)

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HSBC MPF Service

• Quality MPF Management

• Keeping information up to date

• Smart Money Management and Fund Switching

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HSBC MPF Service

• providing convenient communication

– Hotline

– Website

– Branch and ATM network

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Description of HSBC and Manulife

Background of MAULIFE

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• conducts business in Hong Kong for more than 100 years

• expanded into MPF market since 2000

• one of the largest player in the MPF market (15.5% market share)

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• more than 720,000 pension accounts

• managing pension assets at about HK$307 billion

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MPF Product in MANULIFE

• Two MPF schemes

• Manu-Lifestyle (MPF) Scheme

• Manulife Global Select (MPF) Scheme

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Manu-Lifestyle (MPF) Scheme

• provided to conservative investors

• Simple and efficient approach

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Manu-Lifestyle (MPF) Scheme

• 5 different Funds

– Capital Preservation Fund– Interest Fund– Stable Fund– Growth Fund– Aggressive Fund

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Manulife Global Select (MPF) Scheme

• provided to sophisticated and conservative investors

• offers a choice of investment expertise and extensive range of funds

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Manulife Global Select (MPF) Scheme

• provides eleven more funds than Manu-lifestyle Scheme

• provide a very aggressive high-risk option

– Manulife MPF China Value Fund

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Manulife MPF Service

• computerized call center

• personal visits

• customer-oriented seminars

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Manulife MPF Service

• Newsletters

• regular benefit statements

• on-line service centre

• Smart Call telephone service.

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Comparison between the MPF Scheme of HSBC and Manulife

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III. Comparison between the MPF Scheme of HSBC and Manulife

• Two MPF Scheme

– Low-risk Fund– Medium-risk Fund– Aggressive High-risk Fund

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Manu-lifestyle Scheme vs. HSBC Super Trust Scheme

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• provided to conservative investors

• provided to less investment experience investor

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• Conservative Low-Risk Fund– Manulife

• Capital Preservation Fund• Interest Fund

– HSBC• Capital Preservation Funds• Guaranteed Fund

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• Capital Preservation Funds

– mandated by the MPF Schemes Ordinance

– do not have a guarantee of capital and interest

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• invest in grade Hong Kong dollar denominated monetary instruments

Manu-lifestyle Scheme

HSBC Super Trust Scheme

Performance as at October 31 2006

Capital Preservation Fund


Since Launch (%)

5.78 15

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• Manulife Capital Preservation Fund

– mainly hold Hong Kong Bonds– stable return as the prescribed savings rate published

by the MPFA

• HSBC Capital Preservation Fund

– 100% hold in Hong Kong dollar denominated monetary instrument

– achieve a rate of return higher than the average bank saving rate

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Interest Fund Guaranteed Fund

Since Launch (%)

1.65 0.4

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• Manulife MPF Interest Fund– fully hold in Hong Kong Bonds– interest rate is determined by the bond

interest

• HSBC Guaranteed Fund– nearly 50% hold in equity– provide 0.25% interest rate per annually

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• conservative medium-risk fund

• Manulife MPF Stable Fund vs. HSBC Balanced Fund

– Provide capital growth

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Stable Fund Balanced Fund

Since Launch (%)

16.75 32

HSBC invest more equity than Manulife

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• Manulife MPF Stable Fund– mainly in bonds– with an interest guarantee upon the

occurrence of certain pre-determined events

• HSBC Balanced Fund– Assets Portfolio mainly in equity– No interest guarantee

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• Compare the Aggressive high-risk fund

– Manulife• Growth Fund• Aggressive Fund

– HSBC• Growth Fund• Hang Seng Index Tracking Fund

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Growth Fund Growth Fund

Since Launch (%)

34.22 32.1

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• Growth Funds

• helped to maximize the investment return

• mainly in equity

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• Manulife Aggressive Fund vs. HSBC Hang Seng Index Tracking Fund

• Provide long term capital growth

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Aggressive Fund Hang Seng Tracking Fund

Since Launch (%)

33.18 41.10

Better Performance of Hang Seng Index in recent year

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• Manulife MPF Aggressive Fund– a unitized equity fund– mainly in equities and equity-related investme

nts.

• Hang Seng Index Tracking Fund– Invest in Hang Seng Index– the performance of the Hang Seng Index

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Manulife Global Select Scheme vs.

HSBC Super Trust Plus Scheme

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Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme

– provided to a greater investment knowledge and experience investor

– offers a choice of investment expertise

– extensive range of funds

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• Compare the conservative low-risk fund

Manulife Global Select Scheme

Performance since launch as at October 31 2006 (%)



Interest Fund 1.65 Guaranteed Fund 0.4


5.78 Capital Preservation Fund

15

Hong Kong Bond Fund

11.37

International Bond Fund

23.81

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• Different Asset Portfolio

• Manulife have more funds than HSBC

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• Compare the conservative medium-risk fund





Stable Fund 16.75 Balanced Fund 32

North American Equity Fund

-9.15 Stable Growth Fund

30.2

European Equity Fund

-3.32

International Equity Fund

8.36

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• Negative return in two Manulife funds– Significant loss in Asset Portfolio in North Am

erican and European

• Difference in return– Manulife mainly hold bonds– HSBC hold nearly 50% in equtiy

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• Compare the Aggressive high-risk fund





Fidelity stable Growth Fund(Launch at Sept 1 2003)

35.21 Asian Equity Fund 103.8

Growth Fund 34.22 European Equity Fund 26.8

Hong Kong Equity Fund 39.04 Growth Fund 32.1

Japan Equity Fund 27.92 Hang Seng Index Tracking Fund

41.1

Pacific Asia Equity Fund 56.34 Hong Kong Equity Fund 47.2

Fidelity Growth Fund(Launch at Sept 1 2003)

59.72 North American Equity Fund

-15.9

Aggressive Fund 33.18

China Value Fund(Launch at Feb 1 2006)

21.5

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• Negative return in HSBC funds– Significant loss in Asset Portfolio in North

American

• Significant return in HSBC Asian equity– Include in invest in China equity

• Manulife provide a stable positive return

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III. Comparison between the MPF Scheme of HSBC and Manulife

• Conclusion– Manulife Global Select Scheme and HSBC

Super Trust Plus MPF Scheme are similar.

– Manulife have provided six more funds than HSBC

– Manulife performance is on average

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III. Comparison between the MPF Services of HSBC and Manulife

• Compare these additional services of the Manulife and HSBC in the following aspects:

– Hotlines

– Website

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– Seminars

– Newsletters

– Regular benefit statements

– Other Services

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• Compare these additional services of the Manulife and HSBC in the following aspects:

– Manulife provides a wider range services

– electronic services

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IV. Comments on MPF services

• The ultimate goal

• ensuring people are adequately provided for upon reaching retirement age.

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• the choice of the MPF provider

• Chose by employer

• employee can only make the changes in the investment portfolio

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• MPF Scheme Authority

– consider what purpose they want to be in the MPF Scheme

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THE END

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Q & A

Documents

1 Hong Kong Shue Yan College ECON 310 Financial Institutions in Hong Kong Term Paper 2006 Fall