For providers hoping to run Singapore’s CPF Lifecycle Investment Scheme, designing a glidepath is the easy part. According to WealthTech firm Kidbrooke, the far harder challenge is proving, with statistical rigour, that the glidepath will actually deliver across 30 to 40 years of market scenarios.
Most industry attention has centred on asset allocation, target dates and de-risking schedules. But Kidbrooke argues that independent investment consultants, confirmed by the CPF Board as evaluators of selected providers, will not approve a glidepath on aesthetics. They will interrogate the methodology behind it, the stress tests applied, and the analytics describing outcomes across realistic economic conditions. Providers lacking that infrastructure will struggle to close the gap under pressure.
Kidbrooke cautions that the standard institutional instinct, mean-variance optimisation, is structurally wrong for lifecycle funds. The Markowitz framework treats gains and losses symmetrically, but a member falling SGD 15,000 short of the Full Retirement Sum (FRS) has not had a mirror-image experience of one finishing SGD 15,000 above it. Expected Shortfall, or CVaR, which measures the average outcome in the worst 5% of scenarios, is far better suited to a product whose purpose is helping members hit the FRS, and is what regulators increasingly expect.
Deterministic glidepaths carry a similar flaw. A smooth chart showing equities falling from 85% at age 25 to 10% at 65 cannot capture sequence-of-returns risk, where a drawdown in a member’s early fifties produces a fundamentally different result than identical average returns without one. Kidbrooke says the answer is a stochastic simulation engine generating thousands of economic scenarios, producing a probability distribution of outcomes rather than a single projection.
The quality of those simulations depends on the Economic Scenario Generator beneath them, it said. Real markets exhibit fat tails, volatility clustering and correlations that shift under stress; Gaussian models systematically understate tail risk. For CPF, the model must also be calibrated to Singapore’s asset universe, including the STI, SGD-denominated global equities and Singapore government bonds. Full methodological transparency and reproducible audit trails will also be expected, effectively ruling out spreadsheet-based approaches.
Building this in-house is a multi-year effort. Kidbrooke’s KidbrookeONE platform offers the capability through a stateless, API-first architecture, running 5,000 scenarios across 720 time steps per recalculation, with Expected Shortfall and FRS attainment outputs and complete audit trails, while storing no end-customer data. The firm points to its work with Skandia, the Nordic pension provider managing SEK 863bn in assets, which went from concept to live digital advisory service in four months.
As Kidbrooke puts it, the glidepath is the product, but the analytics is what makes it credible.
For more insights into lifecycle investing, read the full story here.
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