Hong Kong's MPF managers told to prepare for US bond holdings after Moody's downgrade: MPFA

South China Morning Post

26-05-2025

Fund managers participating in Hong Kong's US$167 billion Mandatory Provident Fund (MPF) scheme may be forced to sell part of their holdings of US government bonds after the country lost its triple-A grade from three of the biggest rating companies.
The Mandatory Provident Fund Schemes Authority (MPFA), the scheme's regulator, has instructed MPF trustees and fund managers to prepare for a contingency plan if the last remaining credit agency downgrades the US government bonds.
'Recently, the MPFA reiterated this reminder to all MPF trustees, urging them to evaluate the potential implications on MPF funds in consultation with relevant investment managers in view of the latest market situation,' the MPFA said in reply to a query from the Post on Monday.
It also asked the 'trustees to formulate appropriate strategies and mitigation measures in case the US does not meet the definition of 'exempt authority' due to changes in credit ratings'.
The MPFA said such preparation would be needed as the authority had no plan to change the current investment requirements.
It would be the responsibility of the MPF investment manager to 'formulate suitable compliance contingency plans and make timely and orderly adjustments to their asset allocation in response to possible market developments while acting in the best interests of MPF scheme members', the MPFA added.