The Central Provident Fund Board, which is responsible for the state pension fund of Singapore, has appointed Morningstar Research as investment consultant for its CPF Investment Scheme (CPFIS) from March 7. The contract is for a period of three years, with an option for the board to extend for two one-year terms.

Morningstar will evaluate suitable product providers such as fund management companies and insurers as well as their products such as unit trusts, investment-linked insurance products, and exchange-traded funds seeking to be included under the CPFIS.

As of December 2007, the CPFÆs 3.16 million members had retirement assets worth S$136.59 billion ($96.72 billion). The CPF savings earn a minimum risk-free interest rate of 2.5%, which is guaranteed by the Singapore government.

Morningstar û a unit of US-based Morningstar Incorporated û was appointed because it received the highest overall rating based on its qualifications and expertise, track record and price of service, according to the CPF board. Morningstar has 18 offices worldwide and provides data on more than 260,000 investment offerings in total. It has strengthened its position as an investment consultant after acquiring the global funds data-collection business of Standard & PoorÆs last year.

MorningstarÆs appointment is considered by industry players as a major blow to Mercer which is the CPF boardÆs current investment consultant. Mercer was appointed to the role in 1999, and retained the appointment when it was next tendered in 2003. Mercer, a subsidiary of Marsh & McLennan in the US, has employees in more than 40 countries worldwide including Singapore, which is its regional headquarters in Asia-Pacific and where it has around 300 employees.

The CPF board notes that both Morningstar and Mercer assess funds based on qualitative and quantitative aspects of the management of the fund. It says evaluation factors for both are similar, with both reviewing the strength of fund management companies and insurance companies on an organisational level, investment capabilities and fund performance. However, the approaches to the evaluation arenÆt the same.