Our very own Orange County!
Be expecting the following in the press / blogosphere / forums
1. Why did it take a question from Ms Olsen for this issue to surface? (it’s been 4weeks (thereabouts) since the onset of the Lehman debacle)
2. Who decides the investment decision for the Town Councils — i.e. in this instance, who chooses the investment manager (we assume it was “outsourced” to an external manager)? Are they qualified to make such decisions? Bear in mind, it’s an average of $62.5mio under management per town council ($1bn / 16) — quite a big sum of $$.
3. What are the exact investment guidelines? How is reasonable returns defined? Sibor + X%? ,etc etc — your standard suite of investment questions.
4. Who are the external investment managers for the Town Councils? Should they be responsible since they mismanaged the funds re the investment guidelines stated by MND.
5. Is this why some Town Council members were spotted at Hong Lim Park?
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$12m in troubled products
From the Straits Times Nov 17, 2008
TWO town councils – Holland-Bukit Panjang and Pasir Ris-Punggol – have about $12 million invested in troubled structured products.
These products include Lehman Minibonds and Merrill Lynch Jubilee Series 3.
Senior Minister of State (National Development and Education) Grace Fu gave this update in Parliament on Monday, in response to a question from Nominated MP Eunice Olsen.
Since Dec 1 last year, the amount that town councils can invest in non-government stocks, funds or securities has been capped at 35 per cent of the sinking fund.
Holland-Bukit Panjang invested about 6.7 per cent of its total funds available for investment in the structured products, and Pasir Ris-Punggol, about 2.6 per cent.
The sinking funds are used to pay for long-term or cyclical expenditure, such as replacing lifts, pumps and pipes, re-roofing, and repairing and redecorating blocks.
The funds are also used to pay for lift upgrading, so that residents pay a smaller percentage of the total lift upgrading cost.
The sinking fund is distinct from the operating fund, which is used for short term expenditures.
Ms Fu said town councils need to invest their funds prudently so that the accumulated funds are not eroded by inflation.
The investment guidelines – which her ministry has no plans to change – seek to achieve an optimal balance between reasonable returns and financial prudence, she added.
She noted that investments in stocks, funds or securities must be on the advice of a qualified person, such as an investment adviser holding a licence under the Securities and Futures Act, and an approved bank or a merchant bank approved as a financial institution under the Monetary Authority of Singapore Act.
The 16 town councils manage more than $1 billion in sinking funds.
Macro 