What's on the menu? Included versus excluded funds for Singapore's central provident fund investors

• Main Authors: KOH, Seng Kee, Benedict, Mitchell, Olivia S.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3005; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4004/viewcontent/SSRN_id1678080.pdf
• Institution: Singapore Management University

As one of the oldest and largest national mandatory defined contribution pension systems, Singapore's Central Provident Fund (CPF) permits employees to invest their retirement accumulations in a variety of investment instruments rather than leaving them in a government-managed investment fund. Many plan participants avail themselves of this opportunity, selecting from a menu of more than 200 `included' funds that satisfy specific admission criteria set by the CPF Board. Nevertheless, many other funds are excluded from the list of eligible retirement system investments. This article shows that the `included/non-included' screening criteria have been effective, in that included fund managers earned higher average returns, demonstrated better stock-picking and displayed better market-timing skills, than their excluded fund counterparts. In addition, the included funds exhibited stronger persistence in performance, though they offered marginally lower diversification benefits to plan participants.