FTSE MPF Indexes

The Mandatory Provident Fund (MPF) Index Series was launched in 2001 by FTSE Russell in collaboration with Willis Towers Watson (WTW) and Hong Kong Investment Funds Association (HKIFA). The MPF Index Series is based on the FTSE All-World Index Series and provides a range of country and regional indexes currency hedged back into Hong Kong dollars for use by market participants in Hong Kong. The total return indexes within the series are calculated net of withholding tax rates applicable to MPF funds.

The methodology for the MPF Index Series is kept in line with market participants' changing requirements through a market consultation process carried out every three years by FTSE Russell in conjunction with WTW and HKIFA. Market consultations are designed to ensure the indexes provide precise benchmarks for the market by accurately reflecting regulatory requirements, permitted investment markets and asset classes, as well as taking into consideration the specific regulatory requirements under the MPF system. Index enhancements resulting from previous consultations can be downloaded from Index Resources below.

The latest consultation was completed in December 2019. The next consultation is scheduled for end 2022.

FTSE MPF World Government Bond Index

The FTSE MPF World Government Bond Index is designed to comply with the regulatory requirements governing investments in debt securities by Hong Kong Mandatory Provident Fund schemes. The index is based on the FTSE World Government Bond Index (WGBI) which measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. The WGBI is a widely used benchmark that currently comprises sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available.

The FTSE MPF World Government Bond Index incorporates additional criteria as stipulated by the Mandatory Provident Fund Schemes (General) Regulation and Guidelines on Debt Securities. FTSE Russell worked closely with the Hong Kong Investment Funds Association (HKIFA) and Willis Towers Watson to ensure that the index appropriately reflects Hong Kong Mandatory Provident Fund Schemes Authority (MPFA) rules.

Further information about FTSE MPF WGBI can be found here.

FTSE MPF Reference Portfolios

The FTSE MPF Reference Portfolios (RPs) are used for performance measurement and reporting purposes as set out in paragraph D2.3 of the MPFA Code on Disclosure for MPF Investment Funds. In January 2019 the Mandatory Provident Fund Schemes Authority (MPFA) recognized the revised RPs in the Joint Submission made by the Hong Kong Investment Funds Association (HKIFA) and the Hong Kong Trustees' Association (HKTA). The Joint Submission includes implementation of the revised RPs where FTSE Russell replaces Willis Towers Watson as the RP administrator effective from 1 April 2019.

The RPs are designed to measure cross-asset market returns for portfolios with a global market and multi-asset exposure. The RPs are constructed as an index-level composite based on underlying equity and fixed income indexes calculated and maintained by FTSE Russell. The RPs also include a cash component. Further details can be found in the RPs Ground Rules.

FTSE MPF ESG Low Carbon Select Index Series

The FTSE MPF ESG Low Carbon Select Index Series reflects Mandatory Provident Fund (MPF) regulatory requirements including permissible investment markets and asset classes. The indexes hedge currency back into Hong Kong dollars for use by market participants in Hong Kong. The total net return index is calculated net of withholding tax rates applicable to MPF fund. The indexes are comprised of companies from the underlying universes FTSE All-World Index, FTSE North America Index, FTSE Asia Pacific ex Japan index, FTSE Europe Index, FTSE Hong Kong Index, FTSE China Index, and FTSE Japan Index.

The Index Series is constructed to address climate risk concerns and to optimise index level ESG performance using the FTSE Russell Target Exposure methodology. The indexes target a minimum 50% reduction in operational carbon emissions intensity, 50% reduction in fossil fuel reserve intensity and 20% uplift in ESG ratings on the index level at annual rebalances, relative to the underlying FTSE MPF Index*. The index excludes companies involved with controversial product activities, including weapons, thermal coal, tobacco, nuclear power generation, gambling, adult entertainment, and companies involved with controversies related to the UN Global Compact Principles.

Further details can be found in Ground Rules.

* Except the FTSE Europe ESG Low Carbon Select Index which adjust the targets to 50% reduction in operational carbon emissions intensity, 50% reduction in fossil fuel reserve intensity and 15% uplift in ESG ratings.