March 4, 2024

Funds in Singapore’s CPF investment scheme bounce back in 2023

Funds in Singapore’s Central Provident Fund Investment Scheme (CPFIS) posted a return of 7.88% last year, rebounding from minus 15.8% in 2022 as major stock markets rallied in the fourth quarter, according to Morningstar, which voiced “cautious optimism” on the outlook for stocks and bonds this year.

Equity funds in the scheme were the best performer with a return of 9.26%, Morningstar says in a report on March 1. Allocation funds, which invest in a mixed range of asset classes, returned 6.4%, and bond funds returned 4.67%.

On the outlook for 2024, Morningstar pointed out that ongoing debates are centred on whether the US economy will continue to avoid a recession, and if inflation will continue to moderate and the Federal Reserve delivers rate cuts that are in line with expectations.

“Despite heightened risks, we maintain a cautious optimism for both stocks and bonds in 2024. The key risks faced by investors can be summarised as moderate valuations, a softening economy, weakening fundamentals, and external shocks,” the report says.

Expanding on external shocks, it notes that geopolitical tensions in Ukraine, Israel and China are running high posing “significant” risks. Other risks are oil price shocks and a jump in bond yields.

“An oil market shock has the potential to inflict harm on the global economy [while] a sudden surge in long-term yields could have unintended effects that reverberate throughout various sectors of the economy,” the report says.

The Investment Management Association of Singapore and the Life Insurance Association of Singapore appointed Morningstar to monitor performance of all unit trusts and investment-linked insurance products included in the CPFIS.