Understanding and navigating through all the available options in the investment world can be tricky. With thousands of different investment funds to pick from, each fund offers a different risk-reward potential. And there are no guarantees with investment funds – performance is not insured or guaranteed by the government.
However, the government has put in place investment regulations that all Cayman-registered pension plans must follow. These regulations restrict how and what pension funds like Silver Thatch Pensions can invest in. The objective of the regulations is to ensure that pension funds are not exposed to excessive risk nor limited by too little risk, which can result in low returns. The aim is to get your risk exposure “just right” so that your funds can grow enough to outstrip inflation and provide an income for you in retirement.
Of interest, the government-issued investment regulations provide the following guidelines for investing the assets of a pension fund:
- Equities – 40-70%, publically-traded, including:
- large cap (large market value) equities;
- small to medium cap (up to a maximum of 10% of the pension fund’s assets);
- investment grade debentures (loaned equities); or
- mutual or pooled funds that invest in equities;
- Bonds – 20-40%, including:
- Bonds issued by the U.S. Treasury;
- investment grade bonds, corporate bonds, Eurobonds or preferred shares; or
- secured first mortgages (up to a maximum of 10% of the pension fund’s assets);
- Cash equivalents – up to 25%, including:
- U.S. Treasury Bills;
- investment grade treasury bills of foreign countries; or
- investment grade commercial paper, money market funds, bank certificates of deposits, or fixed-term deposits with a bank.
Your savings in the Silver Thatch Pension Plan are managed by a team of over 30 world-class investment managers, who are in turn under the management and oversight of Coutts & Co (Cayman) Limited. Together with research by Coutts, Silver Thatch has carefully put together three investment portfolios – the Conservative, Balanced and Growth Portfolios – that fall specifically within the limits of current law for the investment of required pension contributions.
The portfolios are designed to seek appropriate levels of risk and return. Pension investment regulations state that investments should also take into account the demographic composition of the plan members. This is why these portfolios are matched to your age, income range and marital status. How your pension account and contributions are invested at any given point will depend on your personal risk profile. As you age and your income grows, your personal risk profile changes over time. So too will your investment portfolio, ensuring your investments continue to reflect your needs.