MSCI has launched the MSCI Hong Kong Mandatory Provident Fund (MPF) Indices, which reflect the current investment restrictions imposed on MPF funds by the Hong Kong Mandatory Provident Fund Schemes Authority (MPFA), including the minimum 30 per cent Hong Kong Dollar exposure requirement.
“Since their inception in 2000, the Hong Kong MPF schemes have grown in size and complexity, so it is not surprising that many participating firms are keen to see more innovation in the provision of relevant MPF indices,” says Theodore Niggli, managing director and head of the MSCI index business in Asia Pacific. “In addition to providing an extensive family of MPF indices, we are also introducing a novel index construction methodology that eliminates the need for expensive foreign exchange hedging to comply with the 30 per cent minimum HKD exposure. We believe that the MSCI Hong Kong MPF Indices will be adopted not only for benchmarking purposes, but will also help in the creation of lower cost fund structures.”
There are 50 MSCI Hong Kong MPF Indices in total, providing greater global and regional index coverage than currently available in the market today, including MPF indices for the MSCI ACWI, MSCI World and MSCI Emerging Markets Indices. For investors and managers looking to extend their investment universe, the MSCI MPF Domestic Investable Market Indices, covering Hong Kong, China and ACWI, include large, mid and small caps.
Three types of indices are available: the MSCI MPF Domestic Indices, the MSCI MPF Hedged Indices and the MSCI MPF Unhedged Indices. Each differs in terms of how the MPFA currency exposure requirement is addressed. For example the MSCI MPF Domestic Indices apply a 30 per cent floor with a buffer to the weight of the HKD denominated component, eliminating the need for currency hedging and therefore potentially reducing costs.
The MSCI Hong Kong MPF Indices may be licensed for use as benchmarks or as the basis for financial products such as exchange-traded funds and structured products.