The majority of Plan assets is invested in the stock market. This is because history has shown that over the long term, stocks provide significantly higher returns than bonds or cash. Since the majority of Pension Plan members have over 25 years until retirement, well-chosen stock market investments will likely prove to be the most stable investments for long term growth. This is the reasoning behind pension regulations requiring we invest 40%-70% of the Plan in stocks.
Stocks make up approximately 60% of the investments. Bonds and other fixed income securities make up the remaining 40%. Stocks investments are comprised largely of multi-nationals ‘Blue Chip’ companies, such as Microsoft Corp, Visa and Bayer AG, just to name a few; fixed income investments include bonds like Berkshire Hathaway, Procter & Gamble and Barclays Bank PLC. The Plan invests all or substantially all assets overseas to ensure diversity and liquidity. Plan members live and work in the Cayman Islands and many own homes and businesses here. It is in their best interest to invest their pension money elsewhere, to compensate if the economy of the Cayman Islands should experience a prolonged period of weakness.
The pension plan also needs to be able to buy and sell its holdings quickly and easily to react to changing market conditions or cash flow needs. This means the Plan needs to invest in large companies with active daily trading.