THESE are unprecedented times, Mr Khaw Boon Wan notes.

But in explaining the rationale for town councils' move into investments, he makes it clear that anyone concerned about how their funds are used must look at total performance of the investments rather than individual transactions.

And performance needs to be evaluated over longer timeframes.

But the fact is that no matter how financially savvy anyone is, the financial meltdown this year would have made any serious individual or institutional investor lose money, he points out.

He cites the example of Harvard's endowment fund, which reported a 30 per cent drop in its investment portfolio because of the crisis.

'These are some of the sharpest investors in town and in the world. They have outperformed markets so many times but still their portfolio has shrunk,' he tells Insight.

In fact, these unprecedented times have turned conventional financial wisdom upside down, he notes.

'The fact is that you begin to have all the major central bankers and governments doing absolutely extraordinary things, unconventional things, totally against their philosophies,' he says.

There is a real fear that if nothing is done, the world could slide into another Great Depression.

This fear is what has led to a crisis of confidence in the financial markets - and which in turn has made almost all investors lose money.

'So all serious investors all over the world would have lost money. How to avoid losing money?' he asks.

But providing perspective, and the need to take a longer-term view of developments, he adds: 'We know that this giant tsunami will pass. It will take some time but it must pass. It will pass.

'And the fact that the best brains - regulators, policyholders all over the world - are totally seized with trying to salvage the situation, and the unconventional solutions that they are crafting and continue to craft, at least give people confidence that, hopefully, this will not be a Great Depression Part Two, that we can avoid the worst of this.

'Of course, nobody can guarantee that. But the prospects are, I think, seemingly that the worst is over. But still, to come out of it will take some time.'

Mr Khaw, speaking in his capacity as the People's Action Party's first organising secretary, concedes that town councils have been no different from any other institution or individual who has invested in these times. Their funds have accumulated through the collection of service and conservancy charges and top-ups from the Government over the years.

There are funds for long-term needs - big-ticket items like cyclical work and repairs that have to be done every few years and are not cheap.

'That's the reason why funds have to be set aside for those long-term commitments, which we call the sinking fund. In accounting terms, it can be called capital reserve or depreciation accounts and all companies do that,' he said.

But as these needs are long-term, and councils have five-year or 10-year long-term plans, they are able to estimate their requirements and also know how much 'spare cash' there is - funds that are not needed for immediate use.

'So I can afford to invest in a five-year investment mandate or eight-year investment mandate or 10-year investment mandate and, of course, everything being equal, the longer the mandate, the better the returns because the fund manager has more scope to invest in longer-term investment products which are more interesting and give you higher returns.'

These decisions are not taken lightly.

'Those are more important decisions because you need expertise. You cannot just say, just common sense, because common sense may not work in this instance.'

Councils turn not to people who are mavericks or rogue traders, but to experts who are knowledgeable and trustworthy.

'And you need people like that. And because we are investing public money, we have a responsibility to make sure that it is prudently done. So the basic principle of prudence and conservatism underpins our investment strategy,' Mr Khaw explains.