CPFIS Confusion To Swiber and Everybody’s Delight

I would have never thought that we would be allowed to use our CPF funds to buy anything but the safest bonds and of course, the very unsafe Gold !

I thought I would write about it here for posterity and just in case MAS chances upon this someday.
Found on CPF website. http://mycpf.cpf.gov.sg/Business-Partner/Gen-Info/CPFIS/CPFIS_Bonds.htm”For list of Corporate Bonds, Statutory Board Bonds and Bonds Guaranteed by Singapore Government, please click: http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stock_indiceslist
(Note: Bonds included under the CPFIS are indicated by a “Y” under the CPFIS column)”I did the click and found quite a comprehensive list of Y’s.The catch is this.

“CRITERIA FOR BOND INCLUSIONS

In considering the inclusion of Corporate Bonds under CPFIS, the Board uses the following criteria:

  • The bonds are issued by a company incorporated in Singapore;
  • The bonds are listed on SGX;
  • The bonds are traded in Singapore dollars;
  • The bonds are not offered to institutional investors or accredited investors and certain other persons only under Section 274 or 275 of the Securities and Futures Act;
  • The bonds are not subject to trading restrictions in the secondary market;
  • The bonds are rated at least A2 by Moody’s, A by Standard and Poor’s or A by Fitch; and
  • Prospectus, which comply with the Securities and Futures Act requirements for the bonds, are issued.For bonds which are exempted from the prospectus requirement, an information memorandum setting out the terms of the issue, the risks of investing in the bonds and other relevant information must be issued and made available to CPF members.”

This is strange.

So this Swiber bond is “Y”  in the SGX list as is with most of the other regular non penny stock names. Yet these Swibers that are launched are not CPFIS eligible for the reason that they are offered to institutional and accredited investors.

The “Y” is unfortunate. Does it not give us the impression that the bonds are rated at least A2 then ?

Nevermind that.

There is another loophole by which Swiber and the rest can enter the CPF system.

The CPFIS eligible fund ! http://mycpf.cpf.gov.sg/NR/rdonlyres/1FDBCAEA-CF5E-42CE-958A-62B8708FCB8B/0/CPFInvestmentGuidelinespdf.pdf

“A Fund’s underlying investments may only consist of the following permissible investments:
  • cash;
  • deposits with financial institutions with financial strength ratings of above C by Moody’s, or viability ratings of above BBB by Fitch;
  • money market instruments;
  • debt securities eligible under para4.1 to para 4.3;
  •  units in collective investment schemes (subject to the CPF Board’s approval); and
  • shares (including rights and warrants issued directly by the underlying company), and depositary receipts listed and traded on an exchange.”
” Credit Rating for Debt Securities
4.1  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).
…………….

Paras 4.1 and 4.2 do not apply to unrated debt securities issued by Singapore-incorporated issuers and Singapore statutory boards.
……….

For the avoidance of doubt, “debt securities” in this paragraph include convertible bonds, perpetual bonds and securitized debt.”

Reading all the above and feeling slightly high now.

Not sure if I am on the right track but I did check with a few fund manager friends who manage CPFIS funds and they have assured me –  no Swiber in their books.

Why ? I ask. Why not ?

Let’s give the retail buyer a chance to make 7.25% !

They raise an eye brow and look at me saying, “Would you do the same if you were me ?”

End of story.