Default Investment Strategy
A. What is Default Investment Strategy (“DIS”)?
DIS is a ready-made investment arrangement mainly designed for those members who are not interested or do not wish to make a fund choice, and is also available as an investment choice itself, for members who find it suitable for their own circumstances. For those members who do not make an investment choice, their future investments will be invested in accordance with the DIS. The DIS is required by law to be offered in every MPF scheme and is designed to be substantially similar in all MPF schemes. You may click here to download the DIS leaflet published by the MPFA.
a) Objective and Strategy
The DIS aims to balance the long term effects of risk and return through investing in two constituent funds, a more aggressive fund (“CAF”) and a more conservative fund (“A65F”), according to the pre-set allocation percentages at different ages. The CAF will invest around 60% in higher risk assets (higher risk assets generally mean equities or similar investments) and 40% in lower risk assets (lower risk assets generally mean bonds or similar investments) of its net asset value whereas the A65F will invest around 20% in higher risk assets and 80% in lower risk assets. The DIS funds adopt globally diversified investment principles and use different classes of assets, including global equities, fixed income, money market and cash, and other types of assets allowed under the MPF legislation.
b) Annual de-risking
Accrued benefits invested through the DIS will be invested in a way that adjusts risk depending on a member’s age. The DIS will manage investment risk exposure by automatically reducing the exposure to higher risk assets and correspondingly increasing the exposure to lower risk assets as the member gets older. Such de-risking is to be achieved by way of reducing the holding in the CAF and increasing the holding in the A65F over time. The asset allocation stays the same up until 50 years of age, then reduces steadily until age 64, after which it stays steady again.
In summary, under the DIS:
(1) When a member is below the age of 50, all accrued benefits and future investments will be invested in the CAF.
(2) When a member is between the ages of 50 and 64, all accrued benefits and future investments will be invested according to the allocation percentages between the CAF and A65F as shown in the DIS de-risking table (as per Diagram 1 below). The de-risking on the existing accrued benefits and future investments will be automatically carried out as described above.
(3) When a member reaches the age of 64, all accrued benefits and future investments will be invested in the A65F.
Diagram 1: DIS De-risking Table
|Age||More aggressive fund (“CAF”)||More conservative fund (“A65F”)|
|64 and above||0.0%||100.0%|
c) Dealing Day of annual de-risking for Fidelity Retirement Master Trust
If a Member’s birthday falls on a day which is not on a Dealing Day, then the annual de-risking will be carried out on the next available Dealing Day. If the birthday of the relevant Member falls on the 29th of February and in the year which is not a leap year, then the annual de-risking will be carried out on 1st of March or the next available Dealing Day.
When one or more of the specified instructions (including but not limited to subscription, redemption, transfer or switching instructions) are being processed or are to take effect on the annual date of de-risking for a relevant Member, the annual de-risking in respect of such Member will only take place on the next Dealing Day after completion of these instructions where necessary. Members should note that the annual de-risking may be deferred as a result.
If a Member would like to switch out of the DIS before the annual de-risking takes place, the switching instructions must be received by the Trustee before the following dealing cut-off time in order for the switching instructions to be processed before the annual de-risking takes place:
- for switching instruction submitted via the website of the Investment Manager, 11:59 p.m. on a day which is 1 Business Day before the relevant Member's birthday; or
- for switching instruction submitted via other means, 4:00 p.m. on a day which is 1 Business Day before the relevant Member’s birthday.
If such switching instruction for partial switching out of the DIS received by the Trustee before the dealing cut-off time above is still being processed on the annual date of de-risking in respect of such Member, the annual de-risking will be deferred until the completion of the switching instruction and the de-risking in respect of the remaining accrued benefits invested in the DIS will only take place on the next Dealing Day after completion of such switching instruction.
However, if a switching instruction is received by the Trustee after the above mentioned dealing cut-off time and before the completion of the de-risking process, such switching instruction will be deferred and the annual de-risking will take place as scheduled. Such switching instruction will only be processed after the completion of the de-risking process.
B. How DIS is impacting you?
To guide you in understanding more about DIS and how DIS might impact your existing and future investments, we will mail you a couple of important notifications. Therefore, please ensure that you have the most updated mailing address in our records. If not, please fill-in and submit the Change of Particulars for Members.
Our important notifications' mailing schedule is as follows:
|December 2016||Members who have provided consent to receive our marketing materials will receive electronic newsletter, which will include DIS further updates|
|January 2017||All members will receive our first DIS information pack, including the DIS Pre-Implementation Notice.|
|April 2017||Any members with future investments that will be changed to DIS will receive a notification letter after the completion of the change.|
|6 to 13 April 2017||Starting early April 2017, members with existing investments that will be impacted by DIS will receive DIS Re-Investment Notice (“DRN”) explaining the impact and what they need to do if they do not wish to change their investments to DIS. If members are uncertain whether they will receive the DRN, please contact us.
If members want the accrued benefits in the relevant account and future contributions and transfers to stay invested in the existing constituent funds, members should complete and return the Option 2 Form to the trustee of the scheme within 42 days as set out in the DRN.
The Option 2 Form should be returned by post or by fax to the designated info as set out in the form. Please allow adequate time and affix sufficient postage, if needed, for postal delivery.
Upon receipt of the returned Option 2 Form from the members as specified in the DRN, the trustee of scheme will issue a letter of confirmation to the members by post. If the members do not receive the confirmation within 7 business days, please contact us.
If members do not reply within 42 days, the accrued benefits in the existing default arrangement will be redeemed in whole and re-invested in accordance with the DIS.
You may click here to download the publication of DIS Re-Investment Notice published by the MPFA.
You are also able to view the changes due to DIS and the annual de-risking arrangement in our latest Principal Brochure .
C. How to (i) switch my existing investments into/out of DIS and/or (ii) change investment instruction for future contribution?
You can change your allocation / fund choice(s) via the following channels:
- Log in to the Fidelity Online
- Fill in the Asset Switching / Contribution Re-direction Form For Members form
- Contact our Fidelity Investor Hotline on (852) 2629 2629
Please note that the dealing cut-off time for fund switching is 4p.m. (HK time) on a business day.