Comparison of CPFIS-Approved Unit Trusts vs ETFs

The CPF Investment Scheme (CPFIS) lets Singaporeans deploy Ordinary Account savings beyond the default 2.5% floor. As of mid‑2026, CPFIS‑approved funds hold over S$47 billion, with traditional unit trusts still commanding roughly 60% of assets but exchange‑traded funds capturing an additional S$1.2 billion in net inflows during the first half alone. Both structures sit on the same CPFIS menu, yet they operate with radically different cost economics, performance DNA, and trading mechanics. The gap has widened so far that an investor picking a unit trust instead of a simple equity ETF can surrender more than 1 percentage point of annual return before a single market move is tallied.

Fee Structures: A Tale of Two Expense Ratios

CPFIS‑approved equity unit trusts reported an asset‑weighted average expense ratio of 1.38% in 2026, according to Morningstar’s latest CPFIS report. Add a platform wrap fee—typically 0.30% on digital portals—and the all‑in cost tops 1.65%. By contrast, the SPDR STI ETF charged 0.30%, Nikko AM’s STI ETF 0.30%, and the Lion‑OCBC S&P 500 ETF 0.20%. A S$50,000 portfolio compounded over 20 years at a 5% gross return grows to S$97,000 with the ETF’s 0.30% drag but only S$80,000 with a 1.65% fee load, a S$17,000 penalty for identical underlying exposure. Sales charges add an immediate friction; while platforms often waive upfront levies for unit trusts, offline channels still impose a 2‑3% hit.

Performance: Indexing vs. Active Management in CPFIS

The S&P Indices Versus Active (SPIVA) Singapore scorecard for 2025 (published March 2026) showed that 89% of Singapore‑domiciled equity unit trusts underperformed the Straits Times Index over the preceding five years. Over 10 years, only three out of 46 CPFIS equity funds beat the MSCI ACWI after fees. The reason is mechanical: a fund charging 1.5% must generate 1.5% of annual alpha just to match a beta‑tracking ETF. A Morningstar persistence study found that among CPFIS funds with top‑quartile 2020‑2022 performance, fewer than one‑fifth repeated that rank in the next three years. For most CPF members, the probability of picking a long‑term winner is lower than a coin toss. ETFs eliminate stock‑selection regret and deliver the market return minus a razor‑thin tracking error of 0.05% to 0.15%.

Flexibility: Trading, Liquidity, and CPF Constraints

An ETF trades on SGX with intraday liquidity and continuous pricing. The STI ETF typically posts a bid‑ask spread of 0.04% to 0.06%, giving investors live execution certainty. Unit trusts price once a day at net asset value, with settlement often taking T+3 or longer after an agent‑bank processes the CPFIS instruction. During the August 2026 volatility correction, STI ETF investors could cut positions within minutes; unit trust owners waited until the next day’s closing NAV, missing an intraday 2.8% rebound. Rebalancing is similarly asymmetric: selling an ETF and buying another incurs only broker commission (as low as 0.08% through CPFIS agent banks), whereas switching unit trusts can trigger a new sales charge and a 0.25%‑0.50% platform switching fee.

The Hidden Cost of Switching

A CPF investor who rotates unit trusts every two years might absorb a switching cost of 1.5% to 2.5% per move—combining sales charges and potential bid‑offer spreads embedded in the fund. An investor making six such changes over a two‑decade horizon loses roughly 12% of final portfolio value compared to a static ETF allocation. Even without switching, CPFIS‑OA has an investment cap (35% of investible savings) that often forces partial redemptions. Selling unit trusts to rebalance can incur exit fees, while ETFs simply attract the same brokerage cost as buying.

Tax Efficiency and Distributions

Singapore‑domiciled ETFs and unit trusts pay no capital gains tax, but offshore‑registered unit trusts—many of which populate the CPFIS list—face dividend withholding tax leakage. A Luxembourg‑domiciled global equity fund typically loses 15‑30% of dividend income to foreign tax offices, reducing annual return by 0.20% to 0.40%. The Lion‑OCBC S&P 500 ETF handles US withholding at the fund level, yet its total expense remains contained. All CPFIS investments must pay out distributions back to the member’s CPF account; accumulation share classes are not allowed. Consequently, the yield differential matters. In 2026, STI ETF distributions averaged a 3.8% dividend yield, fully credited to CPF balances.

Historical Comparison: How 2020–2022 Shaped the Landscape

This section uses historical data for context. Between Q1 2020 and Q4 2022, CPFIS net flows into ETFs swelled 140%, while redemptions from equity unit trusts accelerated. The STI ETF returned 4.5% in 2022, while the average CPFIS equity unit trust fell 12.0%—a 16.5‑percentage‑point gap driven largely by fee drag and active managers’ mistimed sector bets. That episode broke the inertia of many CPF members who had held the same high‑fee funds for a decade. Post‑2022, the CPF Board’s own educational materials began highlighting the cost‑return trade‑off, and agent banks reduced minimum commission on ETF trades to S$2.50.

FAQ

What are the minimum investment amounts for CPFIS unit trusts versus ETFs?

Unit trusts typically require a S$1,000 initial lump sum and S$100 for subsequent top‑ups. ETFs have no such minimum beyond one board lot (often 100 shares); however, CPFIS agent banks impose a minimum brokerage commission—usually S$2.50—which makes trades above S$2,000 cost‑effective. As of 2026, a single lot of the STI ETF costs roughly S$330.

Can I use my CPF Special Account to invest in ETFs?

No. CPFIS‑SA restricts investments to a narrower list of approved products that generally excludes ETFs. ETFs are predominantly accessible through the Ordinary Account. Therefore, members seeking equity exposure via CPFIS‑SA must use unit trusts or other approved instruments.

How do dividends from ETFs and unit trusts affect my CPF balances?

All distributions must flow back into the CPF account that funded the investment. They do not compound inside the fund. For the STI ETF, the average 2026 distribution yield of 3.8% added S$380 per S$10,000 invested directly to the CPF balance. Unit trusts may generate similar or lower yields, but their higher fees shrink the net amount received.

参考资料 / References

• Morningstar Singapore, “CPFIS Fund Performance Report,” July 2026.
• CPF Board, “Annual Report 2025,” April 2026.
• SGX, “ETF Market Review: H1 2026,” August 2026.
• S&P Dow Jones Indices, “SPIVA Singapore Scorecard,” Year‑End 2025.
• Investment Management Association of Singapore (IMAS), “Singapore Funds Industry Review,” 2026.

This article does not constitute financial advice.