Martin Lee @ Sg
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Higher Investment Minimum Threshold for Special Account

Starting from 1st May 2009, we will not be able to invest the first 30k in our Special Account (SA). This is an increase of 10k from the current minimum of 20k. The reason given by the CPF board is that the SA has a higher risk free interest rate, thus it is better to be more conservative for the funds inside the SA.

There is no change to the current minimum of $20k for the Ordinary Account (OA).

Another change is that funds which want to continue to take in money under the CPFIS will have to meet the stricter admission criteria that were set since 1st Feb 2006. These criteria include:

  • Having sales charge less than 3%
  • Having expense ratio less than the median of similar funds in the CPFIS
  • Preferably having a track record of 3 years

The second criteria will help to weed out funds that are more expensive in general. This criteria might have to be tweaked in the future as using the median as the cutoff will mean (by definition) that 50% of the funds won’t be able to take in new investments.

As more and more of these funds drop out (which happens once they get too small due to redemptions and no new subscriptions), wouldn’t the lower median affect more funds?

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