【MPF】The Mandatory Provident Fund Schemes Authority announced that it will optimize the approval mechanism for gold ETFs, shifting from individual approvals to approvals by category.

The Mandatory Provident Fund Schemes Authority (MPFA) has announced an update to its guidelines, optimizing the approval process for gold exchange-traded funds (gold ETFs). Approval will move from individual approvals to category-based approvals, effective next Tuesday (the 7th), to enable more gold ETFs to enter the market as investment options for MPF funds.

The MPFA said it understands that gold ETFs offer a low-cost, high-liquidity, and transparent way to invest in gold. Under the existing MPF legislative framework, two gold ETFs that have already been individually approved by the MPFA have become permitted investment items for MPF funds, allowing MPF funds to invest in the gold market through gold ETFs.

Smooth operations since gold ETFs were included in the MPF system

A spokesperson for the MPFA said that, while balancing investment flexibility and risk, and also taking into account the smooth operation since gold ETFs were incorporated into the MPF system, the Authority decided to optimize the approval mechanism for gold ETFs by changing it from individual approval to category-based approval.

After the optimization, a gold ETF only needs to meet the criteria specified by the MPFA, including that it must be authorized by the Securities and Futures Commission and listed on the Hong Kong Stock Exchange; it must be a physical gold ETF; and the gold ETF must not be classified as a derivative products fund, in which case it can become a permitted investment item for MPF funds without requiring individual approval from the MPFA.

Keep the 10% cap on investing in gold ETFs

The 10% cap on how much an MPF fund can invest in gold ETFs, based on the fund’s net asset value, will remain. The relevant investment rules are intended to effectively control investment risk and ensure that the interests of scheme members are properly protected.

In addition, the MPFA said it welcomes a proposed bill that the government plans to submit to the Legislative Council in the fourth quarter of this year to amend the MPF legislation. The bill includes a proposal to relax the rule so that MPF funds may invest at the same time in MPFA-approved fund components, namely the approved pooled investment funds and index-tracking collective investment schemes, as well as individually approved investment items, such as gold ETFs, real estate investment trusts, and so on. If the proposal is implemented, it will help enhance the flexibility of fund investment, enabling the industry to make better use of permitted asset classes, including gold ETFs, to diversify risk and improve the potential for fund returns.