Cost Structures of Investment Offerings in Singapore’s Central Provident Fund

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Business Economics and Public Policy Papers
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Economics
Public Affairs, Public Policy and Public Administration
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Koh, Benedict S
Mitchell, Olivia S
Fong, Joelle H
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As policymakers seek to enhance the returns paid on participants’ investments in their retirement systems, much attention has focused on the Singaporean Central Provident Fund (CPF) and how professionally-managed unit trusts permitted under the CPFIS scheme fit into the system. This paper begins by indicating the investment choices made available to participants; we also summarize the various transaction costs associated with unit trust investments. Next, we examine the determinants of these costs and investigate which factors have a bearing on the cost structure of unit trusts. Our empirical results show that foreign ownership, active style of management, and equity/balanced funds are associated with higher expenses. The paper concludes with a discussion of policy options to reduce cost associated with CPFIS included unit trusts.

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2007-05-01
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