1. Who is Morningstar? 2. Why was Morningstar chosen? 3. Will Morningstar be adopting the same evaluation methodology as Mercer? 4. How does CPF Board ensure a smooth transition to the appointment of a new Investment Consultant? 5. How will the appointment of a new Investment Consultant, i.e. Morningstar, affect existing funds? 6. How does the appointment of a new Investment Consultant affect CPF investors? 7. Will there be any fee revision for product providers with the appointment of a new Investment Consultant?
1. Who is Morningstar?
Morningstar Research Pte. Limited (“Morningstar”) is a wholly-owned subsidiary of Morningstar Asia and in turn, Morningstar Inc. (collectively known as “Morningstar Group”). Morningstar Group is a leading provider of independent investment research in the United States and in major international markets.
Since founded in 1984, the Morningstar Group has been ranking, rating and analyzing mutual funds and exchange-traded funds. They also offer investment consulting and retirement planning services. With operations in 18 countries, Morningstar Group currently provides data on more than 260,000 investment offerings worldwide.
2. Why was Morningstar chosen?
Morningstar had the highest overall rating based on our evaluation criteria (i.e. qualifications and expertise of the consultancy personnel, the consultants’ track record and price of service).
3. Will Morningstar be adopting the same evaluation methodology as Mercer?
Both Morningstar and Mercer (Singapore) Pte Ltd (“Mercer”) assess funds based on qualitative and quantitative aspects of the management of the fund. Evaluation factors are similar. For instance, both Morningstar and Mercer review Fund Management Companies (FMC’s)/Insurer’s strength on an organizational level, investment capabilities and fund’s performance. However, the approach to the evaluation may be different.
The Board will be arranging a communication session for the industry on the new evaluation methodology shortly. We will also be publishing more details on Morningstar’s methodology on the CPF website.
4.How does CPF Board ensure a smooth transition to the appointment of a new Investment Consultant?
There will be no disruption to the CPFIS as a result of the change in the Investment Consultant. Applications received by the Board before 6 March 2008 will be evaluated by Mercer. Applications received after 6 March 2008 will be evaluated by Morningstar.
5. How will the appointment of a new Investment Consultant, i.e. Morningstar, affect existing funds?
Existing funds will not be subject to re-evaluation1 with the appointment of a new Investment Consultant. In addition, admission criteria2 for funds included under CPFIS remain unchanged.
From 7 March 2008, funds seeking re-evaluation and new funds seeking inclusion under CPFIS will be evaluated by Morningstar.
1Existing funds are not required to undergo re-evaluation as a result of the change in investment consultant provided that the FMCs/funds have not undergone material changes in the organisational structure, fund structure or management team. Otherwise, a re-evaluation is still required. 2From 1 Feb 2006, new funds must meet the following criteria for inclusion under CPFIS: a) Top 25 percentile in their global peer group b) Preferably have a track record of at least 3 years c) From 1 July 07, sales charges for all CPFIS funds must not exceed 3% d) Expense ratio lower than median of existing CPFIS funds in its risk category.
6. How does the appointment of a new Investment Consultant affect CPF investors?
CPF investors will not be affected as a result of the change in Investment Consultant as existing funds included under CPFIS would not need to undergo re-evaluation.
7. Will there be any fee revision for product providers with the appointment of a new Investment Consultant?
The Board is currently working on the new fee schedule and will inform product providers when it is ready. The information will also be updated on the Board’s website by end February 2008. The fees are borne by product providers and not by CPF investors.