Fidelity cuts MPF fees by 55.5 basis points

The MPF platform has reached a significant scale, says exec, following cuts from other providers.
Backdating to October 1, 2007, all members of FidelityÆs Mandatory Provident Fund scheme will see fee reduction by as much as 55.5 basis points. The firm currently serves over 210,000 members in MPF for a total AUM of $1.3 billion and a 4% market share. Around 69% of FidelityÆs MPF portfolio is invested in its equity, bond and multi-manager funds, 19% in straight equity, 2% in bonds and another 10% in capital preservation funds.

ôWe are not making noise here,ö says Evan Hale, managing director at Fidelity for Hong Kong, Korea, Singapore and China. ôWe are delivering value.ö

Fidelity is not the first to slash MPF fees, however; it follows in the wake of competitors such as AIA/JF, HSBC, Bank Consortium Trust and Manulife û the top four providers in terms of assets under management.

Hale says the fees will be cut in portfolios that the largest assets are invested in. The new fee of Fidelity Lifecycle equity and bond funds will be lowered to 1.57%, a 55.5 basis points decrease from its original level. The MultiManager Lifecycle Funds range will also see a similar 55.5 basis points cut to a new fee of 1.77%. The more passive Capital Preservation Fund line will see fees cut the least, by 41.5 basis points to 1.36%.

Hong KongÆs MPF regime has reached sufficient scale to allow fee reductions. ôWhen the MPF scheme was introduced initially, there was no scale; there were no assets,ö Hale explains. ôFees have had to be managed at levels that were not necessarily well scaled.ö

Henry Fan Hung-ling, chairman of Hong KongÆs Mandatory Provident Fund Schemes Authority (MPFA), has made reduced fees a central plank of his rein, and he lauded the move: ôFidelity should be complimented for its proactive response to societyÆs needs by reducing fees across the board for its MPF funds.ö

Hale, who moved to Hong Kong nine months ago after growing the firmÆs Korea business, says the fee cuts followed a round of discussion with the Securities & Futures Commission and the Mandatory Provident Fund Schemes Authority (MPFA) that began in February. He says Fidelity was not pressured by the regulators to make this move.

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