Sent this email to ST Forum on 23rd Dec, which was unfortunately not published:

Investments by Town Councils Must Not Become Core Objective

I disagree with Mr Ho's 'Investments by Town Councils and other bodies: A mistake to overact' (13th Dec) and Mr Kong's Higher-yield investments by town councils can pay off (22nd Dec). Town councils need to recognize that their first and foremost role is not in "beating inflation" with the investments of reserves. Their financial competency is irrelevant and should not form a key part of their work. Rather, they have to continue to focus on delivering cost-effective solutions to maintain the housing estates' facilities and equipments.

The need to embark upon major projects with high costs is an oft-cited reason for maintaining a high level of reserves. Unfortunately, this argument does not stand up to close scrutiny. A better solution would be for funds to be generated through community fund-raising projects, on an adhoc basis. This serves dual benefits: One, citizens can vote with their pockets whether they would like to see and pay for the change. Two, this adds to the transparency of and accountability towards the use of town councils' funds.

Also, investing of reserves need to be prudent and non-speculative. These tend to be long term in nature. However, if the reserves were truly intended for long-term, a question arises as to whether they should have waited until the need is nearer before collecting or accumulating them.

Finally, plenty of research has proved that fund managers who consistently "beat the market" is near impossible to identify without aid of hindsight. This naturally implies most professional fund managers are not worth the fees they earn. A recent article "When the Golden Eggs Run Out" in The Economist (4th Dec) pointed out that if an American placed $100 monthly in the average equity fund or balanced fund (i.e., mixture of government bonds and equities) over the last ten years (Nov '98 to Nov '08), he would have ended up with less money than if he had placed them under the mattress. Statistics like these reveal that portfolio management and risk management is more complex than most people assume them to be, including the so-called experts.

I hope that town councils do not steer away from their main purpose to its residents, which is to deliver cost-effective solutions in managing the estates' facilities and equipments. Having lower reserves to manage is a first step to help them refocus on their core purpose.