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13-02-2013, 10:58 AM
fair pt re derivatives. it might look very safe but contain a significant tail risk. although I would like to emphasise that money market funds are the most liquid/and no returns, pretty much like cash. why do corporates put their cash into these? because it's safer than bank deposits, where you take bank counterparty risk beyond the basic insurance.
there is almost no convexity/duration risk involved in money market funds because they buy very short term paper.
CPF imo is not a very good bond. 4% singapore gov risk but with severe constraints on liquidity, etc. But it was not built as a debt instrument, more like a minimum safety net for some people... which may not be a good thing. it's like a spoilt speedometer leading to some people thinking they have enough for retirement - if they had no speedometer they might try to save more and learn more about retirement planning.
there is almost no convexity/duration risk involved in money market funds because they buy very short term paper.
CPF imo is not a very good bond. 4% singapore gov risk but with severe constraints on liquidity, etc. But it was not built as a debt instrument, more like a minimum safety net for some people... which may not be a good thing. it's like a spoilt speedometer leading to some people thinking they have enough for retirement - if they had no speedometer they might try to save more and learn more about retirement planning.