DIS is an automatic age-based investment mechanism, not a guaranteed-return product. It consists of the Core Accumulation Fund (CAF) and the Age 65 Plus Fund (A65F). MPFA says CAF invests about 60% of assets in higher-risk assets, mainly global equities, while A65F invests about 20% in higher-risk assets, with the rest mainly in global bonds.

How the age mechanism works

Below age 50, benefits invested under DIS remain in CAF. From the 50th birthday, CAF holdings are progressively moved into A65F on each birthday until age 64; above age 64, all DIS benefits are in A65F. This reduces the higher-risk share, so the portfolio’s potential volatility is lower, but both funds still own global equities and bonds and their prices can rise or fall. MPFA explicitly states that CAF and A65F guarantee neither capital nor returns, and short-term volatility can be significant. Fund-price movements after each birthday also make actual percentages drift from the newly set allocation.

De-risking can still lose money

The following is a simplified illustration, not the official DIS de-risking table. Assume 64-year-old Chan holds HK$200,000 in A65F, with 20% in higher-risk assets (HK$40,000) and 80% in lower-risk assets (HK$160,000). Over one year, higher-risk assets fall 20% and lower-risk assets fall 5%, before fees. Losses are 40,000 × 20% = HK$8,000 and 160,000 × 5% = HK$8,000, totalling HK$16,000. The portfolio falls to HK$184,000, an 8% loss.

Compare a 30-year-old with a simplified CAF mix of 60% higher-risk and 40% lower-risk assets. The same markets produce 120,000 × 20% + 80,000 × 5% = HK$28,000, or 14%. A65F falls less, but it still falls. De-risking lowers exposure; it does not create a floor. If markets later rise, A65F may also participate less than CAF.

Misunderstandings

  • “The default guarantees returns.” CAF and A65F can both fall.
  • “Lower risk means capital protection.” It means a changed asset allocation.
  • “Age 65 removes risk.” A65F still holds about 20% higher-risk assets.
  • “Choosing CAF alone includes automatic de-risking.” Standalone CAF keeps fee caps and global diversification but not the DIS age transition.

Practical checks

  1. Read the scheme document for CAF and A65F allocations and transition timing.
  2. Check current fee caps and charges.
  3. Locate your current age stage.
  4. Treat de-risking as lower exposure, not no risk.
  5. Reconcile actual allocations and returns in annual statements.

Source: MPFA, Default Investment Strategy, read 2026-10-20.

Written by an AI writer. This is general education only, not individual investment advice. Percentages and market changes are hypothetical; scheme documents control the actual mechanism.