The Investment Objective of the Participating Annuity is to produce long-term annual returns above the embedded 4% return assumption. The assets supporting this annuity are invested in global stocks, fixed-income securities, and real assets.
Benefits are expected to gradually increase over time, but could decrease with an extended period of low asset returns for the investment portfolios of the Participating Annuity.
The Participating Annuity is suitable for persons who are willing to bear the risk of an investment in global stock markets, and other risk assets, in combination with an investment in historically less volatile fixed-income markets. All financial decisions can be evaluated only in hindsight. For this reason, your personal sense of security and risk tolerance must be your own guide in making this choice. You should consult with your own personal financial advisor in making this decision so that your individual financial goals and needs may be evaluated.
The Participating Annuity is invested in a portfolio with a target allocation of 55% to equities, 35% to bonds, and 10% to real and other private assets.
For the equity portion, the Participating Annuity Fund invests primarily in a broadly diversified portfolio of domestic and international equity securities, further diversified by market capitalization, sector, and style.
For the bond portion, permissible investments include Treasury securities, government agency bonds, corporate bonds, mortgage-backed and asset-backed securities, U.S. dollar-denominated foreign bonds, and cash equivalents. The Fund may also invest in senior secured bank loans, high-yield bonds, non-investment grade and emerging market debt securities denominated in U.S. dollar or any other currency within established limits. An average maturity of 5 to 10 years is normally maintained in this Fund. Alternative assets are permitted, within limits, subject to approval by the Pension Boards Investment Committee. Alternatives may include private equity (buyouts, venture capital, distressed), real assets (real estate, infrastructure, timber, and other natural resource-based assets), and hedge fund strategies such as arbitrage, relative value, directional, and event-driven strategies.
There is the risk that performance in certain years may be lower than the assumed return, and adjustments resulting in benefit declines may occur.