Terence Kan, Fidelity
After retirement, it is more important for retirees to stay invested to beat inflation and meet their financial obligations, argues Fidelity, but the investment manager has seen most seniors withdrawing their savings in their MPF accounts once they reach 65 years old.
“There was a lack of post retirement product in Hong Kong, and it limits the choice for the retiree to choose from. But we are now launching the Retireeasy Fund to beat inflation and generate stable return, in hopes of possibly changing the mind set of those retirees,” Terrence Kan, portfolio strategist at Fidelity International, told FSA.
The product, which is managed by Pek Ng, currently allocates almost 40% of its AUM in global bond funds, 31% in global equity, and almost 20% in global corporate bond funds.
Looking at the top 10 holdings, the HK$3.3m ($423,014) fund invests mostly in US treasuries and Germany bunds.
“The overall strategy of the fund is to be conservative, so we invest in investment grade global government and corporate bonds. For instance, US treasuries and Germany bunds have a bigger representation in the fixed income market, thus a higher stability,” explained Kan.
Kan said the fund may also invest in Chinese government bonds, which generally have a higher yield than its government bond peers.
For investment grade corporate bonds, Kan said Fidelity chooses companies which have strong earnings and potential room for credit rating improvement. In particular, he favours names in the technology and consumer sectors.
However, with fears over hiking rates, the fund can allocate up to 50% of its AUM in global equities.
Yet, to avoid volatility in the emerging market, Kan said the fund is mostly focused on developed market stocks and would avoid investing in China A shares.
More flexible than annuities
Compared with annuities, another popular post-retirement product, Kan believes that while an annuity aims to provide a steady cashflow for a longer period of time, the Retireeasy Fund, which charges 1.2% fee, has a focus on beating inflation within the expected life expectancy.
Fidelity also believes it is important to allow high flexibility for retirees to withdraw their savings, so they have launched the “Fidelity MPF Flexible Retirement Solution”.
The online platform allows retired seniors to flexibly pre-set a withdrawal plan based on their needs and is equipped with a retirement withdrawal planner to help their customers to project their regular optimal withdrawal amount.
