A STUDY OF THE CENTRAL PROVIDENT FUND APPROVED INVESTMENTS SCHEME

Abstract

The CPF Approved Investments Scheme was launched in May 1986. Since its inception, there has been concern that CPF members are not exercising sufficient care and caution in investing their painstakingly accumulated savings. The questions of whether the limited number of approved investment instruments yield reasonable returns, their risk characteristics, and if they provide adequate opportunities for diversification has also been raised on a number of occasions. This academic exercise attempts to answer these questions using the techniques of performance measurement developed in Financial Economics. The exercise also aims to examine the salient features of the Scheme, and since the characteristics of the investors is not known, to provide insight to the types of investors that have emerged. We will also look into the effects of the Scheme on the financial sector.