Should statutory boards and town councils (TCs) invest in risky credit-linked notes?

That is the question that has set forummers abuzz, with the news that eight town councils and five statutory boards have recently been linked to complicated credit-linked notes.

While Dr Teo Ho Pin, coordinating chairman for the 14 PAP town councils, has disclosed that the TCs' exposure is around $16m, Finance Minister Tharman Shanmugaratnam only said that the statutory boards have suffered a 14-per cent paper loss this year.

Mr Tharman emphasised, however, that while the five boards - Monetary Authority of Singapore, Singapore Civil Service College, Singapore Land Authority (SLA), Infocomm Development Authority of Singapore (IDA), and Professional Engineers Board - had invested in credit-linked notes, they were not the ones which have gone into default or suffered credit events that have caused their value to plummet to zero and triggered early redemption.

He did not disclose the actual amount, only saying that the exposure as a percentage of their total combined investment portfolio was only about 0.05 per cent.

Meanwhile, Dr Teo defended the town councils' investment strategy, and said the funds were diversified across deposits, securities and other financial products.

He also gave figures on the investment returns in the last six years, comparing average returns:

The other two councils run by opposition MPs were quick to say that their TC's money is in safe hands.

Mr Chiam See Tong of Potong Pasir said that his town council's money is in safe investments, like fixed deposits and Land Transport Authority Bonds.

The other opposition MP, Mr Low Thia Khiang of Hougang said that his investment returns averaged 6 per cent a year, and that his town council does not have any investments in Lehman-linked products or the Jubilee Series 3 Notes.

Online buzz

AsiaOne forummers meanwhile, have their own take on the story.

There are quite a number that expressed their disappointment and disbelief.

One forum member, BTW, enumerated the following issues:

"The issues, to me, are:

1) Full transparency and accountability. Why aren't the people and organisations entrusted with the management of these funds making disclosures on their own volition? Do we need an act of parliament to get disclosures?; and

2) Are there guidelines and/or checks in place to steer TCs in terms of the riskiness of their investment portfolios? If so, have there been violations of those guidelines and checks? Is it time, also, to review the risk-return profile of their portfolio?"

This echoes Nominated MP Eunice Olsen's query in Parliament yesterday, asking the Government to further limit the proportion of investments TCs could make in risky non-government securities and bonds.

Meanwhile, another forummer, amfreeaccess, is wondering whether town councils will "put their mistakes into our burden like increasing those bills?"

A cynical cyhwee69 posted, "Don't ever come asking for increase in fee. If $12M is not significant to them, waive off my $50.50 per month. What is $50.50 compare to $12M?"

YetAnotherCitizen has another concern: He wants to know who gave the OK on the investments.

Songshus counters, "I suppose it would be a real waste to leave those millions lying there idle? So investing them is a better alternative."

But ultimately, as BTW concluded, "We need answers - and assurances."