CPF INVESTMENT GUIDELINES (CPFIG)
Introduction
In this document,
a) Collective Investment Schemes or a "CIS" is as defined in section 2(1) of the Securities and Futures Act 2001 (No.42 of 2001)     b) "Fund(s)" refers to a CIS or an Investment-linked Insurance Product (ILP) sub-fund included under CPFIS.     c) For a Fund which does not have a trustee, the word "trustee" in this document means the Board of Directors of the company offering the Fund or the Principal Officer of the insurance company that has appointed the Manager to manage the Fund.	Amendments made: effective 15 September 2003
This document [CPF Investment Guidelines (CPFIG)] sets out the investment guidelines that Fund Management Companies (FMCs) have to comply with, over and above the requirements set out in the Code on CIS for Non-Specialised and Specialised Funds (MAS Guidelines), for the following types of funds or services that are allowed under CPFIS:
a) CIS which are authorised1 or recognised2 by the Monetary Authority of Singapore (MAS), excluding Hedge Funds and Futures & Options Funds that are not allowed under CPFIS, must comply with the relevant Appendix on investment guidelines and borrowing limits set out in the Code on CIS issued by MAS and registered by CPF as an eligible investment under the CPF Investment Scheme;     b) Investment-linked Insurance Product (ILP) sub-funds that are approved by the MAS and comply with MAS Notice 307 on Investment-Linked Life Insurance Policies; and,     c) Fund Management Accounts (FMAs).
While the CPFIG and the MAS Guidelines may not be fully applicable to the management of an FMA, the FMC is nonetheless required to manage this type of account in a way which best suits the financial circumstances and risk profile of the individual within these guidelines.
1 For an FMC that intends to offer an authorised Fund that is wholly managed in Singapore, the FMC and its related group of companies must manage at least S$500million of discretionary funds in Singapore.     2 For an FMC that intends to offer an authorised Fund that is sub-managed or feeds into another CIS not included under CPFIS, or a recognised Fund, the FMC and its related group of companies must manage at least S$1billion of discretionary funds globally.
1. Diversification     1.1. Any Fund offered by FMCs under CPFIS must be reasonably diversified (e.g. in terms of type of investment, market, industry, issuer, etc., as appropriate), taking into account the type and size of the Fund, its investment objectives, and prevailing market conditions.     1.2. FMCs must adopt appropriate investment limits or operating ranges (by market, asset class, issuer etc.) for each Fund.
2. Deposits and Account Balances With Financial Institutions       For the purpose of this paragraph, a rating refers to a solicited rating and not a "pi" ("public information") rating.     2.1. FMCs may place monies with financial institutions with individual/financial strength ratings of above C by Fitch Inc or Moody's. Branches of a financial institution are deemed to have the same credit ratings as their head office. However, subsidiaries of financial institutions must have their own credit ratings.     2.2. Where a rated financial institution with which the Fund has placed monies ceases to meet the requisite minimum rating, the FMC should as soon as practicable but in any event within 1 month, withdraw the monies. In the case of a fixed deposit, if the FMC satisfies the trustee that it is not in the best interest of unit holders to withdraw the deposits within 1 month, the trustee may, subject to the following conditions, extend the 1-month period:- the deposit must not be rolled over or renewed; the deposit is not put at substantial risk; and such extension is subject to monthly review by the trustee.
3. Credit Rating for Debt Securities     3.1. FMCs may invest in debt securities rated at least Baa by Moody's, BBB by Standard and Poor's or BBB by Fitch Inc (including sub-categories or gradations therein).     3.2. Debt securities that do not have the requisite ratings cited in Para 3.1 but which are fully, unconditionally and irrevocably guaranteed as to principal and interest by entities with individual/financial strength ratings of above C by Fitch Inc or Moody's, qualify as approved investments under these guidelines.     3.3. Paras 3.1 and 3.2 do not apply to debt securities issued by Singapore-incorporated issuers and Singapore statutory boards that are not rated. FMCs may invest in all such debt securities until such time as is stated otherwise.     3.4. If the credit rating of a debt security in a Fund's portfolio falls below the minimum rating, the FMC is required to sell the debt security within 3 months, unless the FMC satisfies the trustee that it is not in the best interest of unit holders to do so, in which case, such disposal should be carried out as soon as the circumstances permit. Such extension is subject to monthly review by the trustee.
4. Single Party Limit     4.1. Exceptions to the single party limit allowed for structured products are subject to the criteria set out in Appendix 1 of the CPFIG, over and above that set out in Annex 1a of the MAS Guidelines entitled "Exceptions to Single Party Rule for Investments in Structured Products".
5. Securities Lending     5.1. Up to 50% of the value of the deposited property of the Fund may be lent at any time provided adequate collateral (i.e. collateral with sufficient margin over the value of the lent security) is taken. Such collateral can either be in:       a) cash,   b) deposits with financial institutions with a minimum short-term rating of Prime-1 by Moody's, A-1 by Standard & Poor's or F-1 by Fitch Inc; or   c) letters of credit and banker's guarantees where the issuers are rated at least Prime-1 by Moody's, A-1 by Standard & Poor's or F-1 by Fitch Inc; or   d) debt securities which have remaining maturity of not more than 366 calendar days and are rated at least A2 by Moody's, A by Standard & Poor's or A by Fitch Inc. However, the 366 day requirement need not be complied with, if the collateral taken are debt securities with rating of at least A2 by Moody’s, A by Standard & Poor’s or A by Fitch, AND the securities lending transaction is conducted through an institution with a credit rating of at least A2 by Moody’s, A by Standard & Poor’s or A by Fitch, AND the institution would indemnify the fund in the event of losses due to failure by the securities borrower to return the borrowed stock.     5.2. Cash collateral should be invested only in debt securities which have remaining maturity of not more than 366 calendar days and rated at least A2 by Moody's, A by Standard & Poor's, A by Fitch Inc, or deposited with financial institutions with a minimum short-term rating of Prime-1 by Moody's, A-1 by Standard and Poor's, F-1 by Fitch Inc. Such deposits must have a remaining maturity of not more than 366 days.
6. Unlisted Shares     6.1. Investments in unlisted shares (excluding IPO shares which have been approved for listing) are allowed within the 5% deviation limit.
7. Borrowings     7.1. The 10% borrowing limit set out in the MAS Guidelines, must be adhered to without exception. For feeder funds, the borrowing limit is to be applied to the Singapore Fund.
8. Deviations from The Guidelines       This paragraph sets out the circumstances when an FMC may invest up to 5% of the value of the Fund in investments which fall outside the MAS Guidelines and/or the CPFIG.     8.1. Funds Constituted in Singapore and are wholly managed in Singapore The FMC of a Fund must ensure that the Fund is managed in full compliance with the MAS Guidelines and that at least 95% of the value of the deposited property of the Fund is invested in accordance with the CPFIG at all times.     8.2. Funds Constituted in Singapore that are Partially or Wholly Sub-Managed The FMC of a Fund that have received the Board's approval for sub-management of such Funds in Singapore or abroad must ensure that the Fund is managed in full compliance with the MAS Guidelines and that at least 95% of the value of the deposited property of the Fund is invested in accordance with the CPFIG at all times.     8.3. Funds Constituted in Singapore that invest in other funds not included under CPFIS With the Board’s approval, a Fund may invest in another fund that is not included under CPFIS (see document on “Application and Admission Criteria for Funds Managed by FMCs/ Insurers”). The FMC must ensure that at least 95% of the value of the deposited property of the Fund is invested in accordance with the MAS Guidelines and the CPFIG at all times. Where a Fund invests partially in another CIS that is not included under the CPFIS, the 5% deviation allowed applies as follows:- The total sum of the Fund’s pro-rated share of the deviating investments by the underlying CIS and the deviating investments of that part of the Fund which is managed in Singapore, or partially or wholly sub-managed in Singapore or abroad, shall not exceed 5% of the value of the Fund.          "Pro-rated share" is defined as follows:- Dollar value of investments of Fund in underlying CIS X Dollar value of deviating investments of underlying fund Dollar value of underlying CIS For the avoidance of doubt, the part of the Fund that is managed in Singapore, or partially or wholly sub-managed in Singapore or abroad must be invested in full compliance with the MAS Guidelines, and any deviating investments should only be in respect of the CPFIG.     .8.4 Fund-of-Funds (FOF) The FMC of an FOF must ensure that at least 95% of the value of the deposited property of the FOF is invested in accordance with the MAS guidelines and the CPFIG at the time of investment. Subsequently, the FMC of FOF should ensure that the FOF continues to comply with the above on a regular basis (e.g. when periodic reports of the CIS are available), no less than once every 6 months.     8.5. Funds that are Constituted Outside Singapore The FMC of a Fund that is constituted outside Singapore must ensure that at least 95% of the value of the deposited property of such Fund is invested in accordance with the MAS guidelines and the CPFIG at all times.
9. Breach of Single Party and Other Limits     9.1. If the 5% limit on investments which deviate from the stated guidelines in paragraph 8 is exceeded as a result of one or more of the following events:       a) the appreciation or depreciation of the value of the deposited property of the Fund;   b) any redemption of units or payments made from the Fund; or   c) any changes in the total issued nominal amount of securities of a company arising for example from rights, bonuses or benefits which are capital in nature   or the underlying fund of a Fund acquiring more "deviating" investments, the FMC shall within 3 months from the date when the limit is exceeded:-   i) For Funds which are locally managed, sub-managed or constituted outside of Singapore, sell so much of such securities;     ii) For Funds invested in CIS not included under CPFIS, sell so much of such units in the CIS as may be necessary to result in the 5% limit being no longer exceeded. The period may be extended if the FMC satisfies the trustee that it is in the best interest of unit holders to do so. Such extension is subject to monthly review by the trustee.     9.2. If any of the limits are exceeded other than as a result of the events stated in paragraphs 9.1(a), (b), (c) or the underlying funds of a Fund acquiring more prohibited investments, the FMC is required to sell so much of such investments and/or reduce such borrowings immediately to result in the limit being no longer exceeded.     9.3. Reporting of Breaches   a) An FMC is required to inform the Board of a breach of the CPF Investment Guidelines by Funds that it manages within 14 calendar days of the occurrence of the breach. For Funds which invest in other funds that are not managed by the FMC itself, the FMC is required to inform the Board within 14 days of the date of notification of the breach by the manager of the other fund or the date the FMC becomes aware of the breach, whichever is the earlier.         b) In the event that the trustee agrees to an extension of the deadline (beyond that stipulated in the CPFIG) to rectify the breach, the trustee should inform the Board within 7 calendar days of its agreement to the extension. The trustee should also inform the Board within 7 calendar days of the rectification of the breach.
9.4 An FMC that is unable to adhere to Paragraph 9.2 and is unable to (or does not) obtain an extension under Paragraph 9.3b set out above must take the following actions:         a) report such breach to the Board within 14 calendar days of the occurrence of the breach;         b) cease to accept subscriptions for the Fund from the CPF Ordinary and Special Accounts with immediate effect and seek to exclude the Fund from CPFIS1 ;         c) provide, within 3 months from the date of the breach, • notice to each CPF member invested in the Fund; • full disclosure on the impact of the breach; and • each investing member with the right to redeem or switch to another Fund without charge;         d) continue to monitor the breach and report to the Board on a monthly basis as to the status of such breach until the breach is rectified   1 All requests for exclusion of Sub-Funds under CPFIS must be submitted in writing. Sub-Funds delisted from CPFIS remain subjected to MAS guidelines at all times.	Amendments made effective 11 April 2005
10. Prohibited Investments       Any other investments/activities not mentioned in these guidelines shall be prohibited, and subject to the deviation limit as stated in paragraph 8.
Latest Document Update Reference: INVDS/11 Apr 2005/CPFIG Previous versions: INVSL/6 Sep 2003/CPFIG 6 IVDML/6 September 2002 /CPFIG 6 INVOHB/1 Jan 2002/CPFIG, INVOHB/27 Sept 2001/CPFIG, ISBML/31 Jan 2001/UT CPFIG
Appendix 1
Exceptions to Single Party Limit for Investments in Structured Products
1. Revision in Ratings of Issuer, FI, or Counter Party     1.1. Where the rating of the issuer or the Third Party referred to in paragraph 2.1(a) of Annex 1a entitled “Exceptions to Single Party Limit for Investments in Structured Products” of the Non Specialised Fund Guidelines in the MAS Code on CIS falls below those specified therein or if the issuer or Third Party ceases to be rated, the manager should within 3 months from the occurrence of such event take action to comply with the 10% single party limit. The 3-month period may be extended if the manager satisfies the trustee that it is in the best interest of the participants. Such extension should be subject to monthly review by the trustee.     1.2. Where the rating of the FI or the Third Party referred to in paragraph 2.1(b) of Annex 1a entitled “Exceptions to Single Party Limit for Investments in Structured Products” of the Non Specialised Fund Guidelines in the MAS Code on CIS falls below those specified or if the FI or Third Party ceases to be rated, the manager should within 3 months from the occurrence of such event take action to comply with 10% single party limit. The 3-month period may be extended if the manager satisfies the trustee that it is in the best interest of the participants. Such extension should be subject to monthly review by the trustee.     1.3. Where the rating of the issuer referred to in paragraph 2.2 of Annex 1a entitled “Exceptions to Single Party Limit for Investments in Structured Products” of the Non Specialised Fund Guidelines in the MAS Code on CIS falls below those specified, the manager should within 3 months from the occurrence of such event take action to comply with the one-third or 10% single party limit, whichever is applicable. The 3-month period may be extended if the manager satisfies the trustee that it is in the best interest of the participants. Such extension should be subject to monthly review by the trustee.