【MPF】 The Mandatory Provident Fund Schemes Authority announces an optimization of the gold ETF approval mechanism, shifting from individual approvals to category-based approvals.

The Mandatory Provident Fund Schemes Authority (MPFA) announced an update to its guidelines, optimizing the approval process for exchange-traded funds (gold ETFs) that trade gold on the market. Instead of individual approvals, the process will shift to approvals by category, effective from Tuesday (the 7th), to allow more gold ETFs to join 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 current MPF legal framework, there are already two gold ETFs that have been individually approved by the MPFA, which are permitted investment items for MPF funds, enabling MPF funds to invest in the gold market through gold ETFs.

Smooth operations since gold ETFs were incorporated into the MPF system

An MPFA spokesperson said, balancing investment flexibility with risk, and considering that operations have been smooth since gold ETFs were incorporated into the MPF system, the authority decided to optimize the approval approach for gold ETFs by changing it from individual approvals to approvals by category.

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

Maintain the 10% cap on investing in gold ETFs

The 10% limit on MPF funds’ investment in gold ETFs, based on the fund’s net asset value, will remain. The relevant investment rules aim to effectively manage investment risk and ensure that the interests of scheme members are properly safeguarded.

In addition, the MPFA said it welcomes the government’s plan to submit to the Legislative Council in the fourth quarter of this year a draft ordinance to amend the MPF legislation. The proposal includes suggesting that MPF funds be allowed to invest simultaneously in MPFA-approved fund components, namely authorized pooled investment funds and index-tracking collective investment schemes, as well as individual permitted investment items, such as gold ETFs and real estate investment trust funds. If the proposal is implemented, it will help enhance the flexibility of fund investments, enabling the industry to make better use of permitted asset classes, including gold ETFs, to diversify risk and improve the potential for fund returns.