What’s on the Menu? Included Versus Excluded Investment Funds for Singapore’s Central Provident Fund Investors

27 Pages Posted: 18 Sep 2010

See all articles by Olivia S. Mitchell

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Benedict S. Koh

Singapore Management University - Lee Kong Chian School of Business

Date Written: August 16, 2010

Abstract

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 two hundred “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 paper 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.

Keywords: pension, retirement, investment, portfolio, mutual fund, investment choice, stock selection, market timing, plan risk and return

Suggested Citation

Mitchell, Olivia S. and Koh, Benedict S., What’s on the Menu? Included Versus Excluded Investment Funds for Singapore’s Central Provident Fund Investors (August 16, 2010). Pension Research Council WP 2010-12. Available at SSRN: https://ssrn.com/abstract=1678080 or http://dx.doi.org/10.2139/ssrn.1678080

Olivia S. Mitchell (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Benedict S. Koh

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

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