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Feedback |
CPF Board’s Reply |
| (1) |
Need for further clarification on item 10.2 - if CPF is referring to the breach of the single party limit of 10% or a breach of the 5% deviation from stated guidelines mentioned in 8.1, 8.2 and 8.3 |
The type of fund (e.g. if it is a fund constituted and wholly managed in Singapore or a fund feeding into a foreign fund etc) would determine if the 5% deviation is to be applied only to CPFIG or to both the MAS Guidelines and CPFIG. Please see Appendix A for details on the application of the 5% deviation limit. We have made the deviation limits allowed clearer in the revised CPFIG. |
| (2) |
Under the CPF guidelines, a list of prohibited investments and activities were mentioned. This clause is now omitted under the revised version. We seek clarifications that under the new revised guidelines, any other investments not mentioned in both the MAS and CPF guidelines are permitted as long as they fall within the 5 % deviation limit. |
For avoidance of doubt, we have stated in the revised CPFIG that any other investments/activities not mentioned in the guidelines shall be prohibited, and subject to the deviation limit as explained in (1) above. |
| (3) |
Need for clarification on para 3 Credit Rating for Debt Securities and its applicability on rating convertible bonds. The issue is one of deciding whether a convertible bond is more a bond or an equity. There is a feedback from one of our members that an inconsistency exist i.e. that a bond of below-investment grade was disallowed whereas the equity instruments of the same issuer and thus rating was allowed. |
Convertible bonds are treated as debt securities as they would remain as a debt security before the holder exercises the right to convert it to the issuing company’s equity.
As the risk profile for equity and bond funds differ, they are not put on the same footing. |
| (4) |
The need to clarify single party limits under para 4 for Singapore GLC securities. The definition of single party under the existing CPFIG is a company and its subsidiary companies. Under the Code on CIS, includes both fellow subsidiaries and holding companies as well. Question is asked if Temasek companies have to be aggregated as a single party. If so this could pose problems for single country fund managers, where these large blue chip stocks, if amalgamated would result in breaches to the 10% limit. Likewise the amalgamation of securities issued by various Statutory Boards e.g. LTA, JTC and HDB would pose similar breach issues. |
Aggregation of Temasek companies
We are looking into this and would revert later.
Amalgamation of securities issued by Statutory Boards
Securities issued by the Singapore government should not be aggregated with, say, securities issued by Statutory Board A unless Statutory Board A’s securities are guaranteed by the government; in which case the securities of the government and Statutory Board A should be aggregated. However, if the Singapore government’s long term issuer rating is AA or above, the single party limit is not applicable.
Securities issued by sovereigns not having a minimum long-term issuer rating of AA have to be aggregated with that of agencies whose securities the sovereign guarantees. |
| (5) |
To streamline the single party limit computation stipulated under MAS notice 307 to the Code on CIS. The MAS Notice does not have exemption for single party limit. |
The MAS Notice 307 is currently being reviewed to align the requirements for ILPs with those contained in the Code on CIS, where appropriate. The review includes the alignment of the single party limit for ILPs with that applicable for CIS. |
| (6) |
Para 5 Securities Lending. That the Guidelines incorporate the exemption defined under 5.1(c) for 5.2 on Cash collateral as well. This would enable FMCs to have more flexibility investing the cash pool. |
The exemption would not be extended to cash collateral. For cash collateral that is being invested in debt securities, the fund is obliged to return cash when the securities transaction is unwound. Thus, where cash is invested in debt securities, the fund would have to liquidate these investments in order to return cash to the borrower. As debt securities with a longer term may be subject to greater fluctuations in price, we would retain the 366 day requirement to minimize potential losses to the fund. |
| (7) |
Para 3.2 -Suggest addition of word “financial” before “institution”. This will bring it in line with wordings contained in Para 2.1. |
It would not be appropriate to add the word “financial” before “institution” because a non-financial corporation could, for example, guarantee the debt issue of its subsidiary.
Instead, we have added in the word “entity”. |
| (8) |
The net effect of Para 3.1 of Appendix 1 of the MAS Guidelines is that cash received as collateral may be invested:
(a) in the form of instruments consistent with the investment objective and character of the scheme; AND
(b) with a remaining term to maturity of not more than 366 days.
Under Para 5.2 of the proposed CPFIG, cash collateral may be invested in (a) debt securities which have remaining maturity of not more than 366 days; OR(b) deposits with financial institutions….;
We would assume that deposits with financial institutions should also be subject to the 366 days limit. If so, this should be made clear in the wordings. |
We have included at para 5.2 of the revised CPFIG that these deposits must have a remaining maturity of not more than 366 days. |
| (9) |
Is it the intention of CPF Board and MAS that the fund manager may not invoke the CPFIG 5% deviation limit if an MAS Guideline is being "breached"? |
Please see Appendix A for how a fund should comply with MAS Guidelines and CPFIG. |
| (10) |
Removal of Prohibited Investments Clause. Does it then mean that funds may invest in other any instruments/ activities not mentioned in these guidelines? |
For avoidance of doubt, we have included a paragraph in the revised CPFIG that any other investments or activities not mentioned in these guidelines shall be prohibited, and be subject to the deviation limit as explained in (9) above. |
| (11) |
Does this waiver of the Single Party Limit also apply in the case of deposits placed with Financial Institution with a minimum short-term rating of Prime-1 by Moody's, A-1 by S&P, F-1 by Fitch Inc in relation to Securities Lending (Para 5.2 of Draft CPFIG)? |
No. |
| (12) |
To include letters of credit and bankers’ guarantees as acceptable collateral for securities lending. |
We have included 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, as acceptable collateral for securities lending. |