Depends how technical u want the answer to be. =D
In short, CPF monies are 'invested' by the CPF Board (CPFB) by 'buying' Special Singapore Government Securities that are issued and guaranteed by the Singapore Government.
Thus the 4% is guanranteed by the full faith of Singapore government. Which in turn effectively by the tax moneies of the nation. =D So indirectly, tax payers subsidise the high interest rates cPF members get.
Write your thoughts