The Hong Kong Mandatory Provident Fund Schemes Authority (MPFA) has updated its guidance to streamline the approval mechanism for gold exchange-traded funds (gold ETFs), effective immediately.

The change shifts from approving each individual fund to a category-based approval system, facilitating the inclusion of more gold ETFs as permissible investment options for MPF funds.

The MPFA stated it is continuously reviewing and broadening the range of permissible asset classes for MPF funds, aiming to provide the industry with more diversified investment tools to better help scheme members diversify investment risks and enhance potential returns.

The authority recognizes that gold ETFs offer a low-cost, highly liquid, and transparent method for investing in gold. Under the current MPF legislative framework, two gold ETFs have already been individually approved by the MPFA as permissible investments, allowing MPF funds to access the gold market through these ETFs.

Following the optimization, a gold ETF that meets the criteria stipulated by the MPFA—including being authorized by the Hong Kong Securities and Futures Commission, listed on the Hong Kong Stock Exchange, being a physical gold ETF, and not being classified as a derivative fund—can become a permissible investment for MPF funds without requiring individual approval from the MPFA.

The existing cap, which limits an MPF fund's investment in gold ETFs to no more than 10% of its net asset value, will remain in place. This investment regulation is designed to effectively control investment risk and ensure the proper protection of scheme members' interests.

The MPFA also expressed support for the Hong Kong government's plan to submit a bill to the Legislative Council in the fourth quarter of this year to amend MPF legislation. The proposed amendments include relaxing restrictions to allow MPF funds to invest simultaneously in both MPFA-approved fund components (such as approved pooled investment funds and index-tracking collective investment schemes) and individual permissible investments (like gold ETFs and real estate investment trusts).

Once implemented, this is expected to enhance the flexibility of fund investments, enabling the industry to better utilize permissible asset classes, including gold ETFs, for risk diversification and improving the potential returns of funds. The MPFA has pledged its full cooperation with the government's related work on this initiative.