The Pension Research Council
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Working Paper

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

Benedict S. K. Koh and Olivia S. Mitchell

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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]