Marshall Islands Social Security Administration

Investments

Published 14 March 2025

Local Investments

Acquisition of BOMI and MISCo shares of stocks

On February 19, 1999, the RMI Government fully repaid a MISSA loan and related interest, totaling $1.94 million, through transferring its ownership of 94,485 shares of the Bank of the Marshall Islands (BOMI) stocks to the Administration. Later, 30,000 of these shares were sold to a third party that subsequently reduced MISSA’s shareholding to 31%.

Bank of Marshall Islands

In 2006, MISSA purchased 3,000 shares of stock from the Marshall Islands Service Corporation (MISCo), a local financing company affiliated with BOMI, at $10 per share. 

On October 31, 2013, Marshall Islands Holdings, Inc. (MIHI), a local holding company incorporated on February 27, 2013, acquired all of the outstanding common stock of BOMI. Prior to MIHI’s acquisition of BOMI, MISSA owned 65,4127 shares of stocks of BOMI valued at $10,959,846. Between 2014 and 2017, MISSA received an additional 392 shares from MIHI, increasing MISSA’s stockholding to 65,809 shares. In 2018, MISSA received an additional 100 shares from MIHI and exchanged 3,334 MIHI shares at $150 per share for 38,469 MISCo shares at $13 per share. 

The exchange of MISCo shares has reduced MISSA’s stockholdings with MIHI to 62,575 shares. In 2019, MISSA received 75 additional shares from MIHI and exchanged 2,500 MIHI shares at $200 per share for 38,461 MISCo shares at $13 per share. This reduced further MISSSA’s stockholding with MIHI to 60,150shares. In 2020 and 2021, MISSA received 100 additional shares from MIHI which increased MISSA’s stockholding to with MIHI to 60,250 shares.

Since MISSA’s acquisition of BOMI shares in 1999, the Administration has received annual cash dividends. In conformity with generally accepted accounting principles, cash dividends were recorded in MISSA’s books as reductions in the carrying value of investments in the balance sheet, essentially decreasing the investment account. Furthermore, the share of MISSA in MIHI/BOMI’s annual profit or loss are recorded as addition (if profit) and reduction (if loss) to(from) the carrying value of investments, based on MISSA’s percentage of stockholding with MIHI/BOMI. This is in conformity with the equity method of accounting which is used when an investor like MISSA owns 20%-50% of the voting stocks of a company like MIHI/BOMI. From the 31% controlling interest of MISSA in 1999, it gradually increased to 36% as of September 30, 2021 (audited).

MISSA’s membership to the BOMI Board began in 2001 with three members and then four in 2003 and onward. 

As of December 31, 2024, the market value of BOMI shares amounted to $10,242,500 while MISCo shares totaled $1,361,360.

Aside from MISSA’s stock ownership at MIHI/BOMI and MISCo, the Administration also has $6.0 million worth of Time Certificate of Deposits (TCDs) at BOMI. The Administration anticipates that in the near future, payments to beneficiaries and administrative expenses may exceed collection from contributions. The TCDs represent MISSA’s short-term cash reserves and will be utilized to ensure that MISSA has enough cash available for uninterrupted payments to the retirees and other beneficiaries of the Retirement Fund. Therefore, the TCDs at BOMI are one of MISSA’s most important assets and will be withdrawn only to pay the retirees and beneficiaries in case of a cash shortfall.

Currently, MISSA also has a $3.0 million Certificate of Deposit with Bank of Guam, which is classified as local investment.

Local Investments

Except for MIHI/BOMI and MISCo stocks and local TCDs, the main bulk of the Retirement Fund is invested outside the country and comprised of mutual funds and exchange traded funds (ETFs).

The Administration’s foreign funds are held and administered by Schwab, MISSA’s Investment Custodian while Wealth Enhancement Group is MISSA’s Investment Advisor.

The market value of MISSA’s offshore investment totaled $23.7 million in Nov.2002, when MISSA first hired its current advisor, Investor Solutions, Inc. (which has subsequently merged with Wealth Enhancement Group in 2022). Over the years, it has grown significantly and as of Dec. 31, 2024, its market value increased to $84.7 million, about 3.5 times its original value despite the $22.3 million drawdowns from the Fund between 2010 and 2016 when MISSA faced difficult challenges with its cash flow. It is also important to note that between Nov. 2022 and Dec. 2024, MISSA has injected an additional $7.365 million into the foreign investment.

As per investment advisor’s report for the calendar year (CY) ended December 31, 2024, the market value increased by $9.22 million in CY 2024, with a corresponding 12.22% net return. Since inception in Nov. 2022, the market value increased by $75.93 million after the $7.365 million additional investment and $22.3 million drawdowns, with an average of 7.06% annual net return in 22 years.

MISSA’s latest Investment Policy Statement (IPS) that was approved by the Board in 2021 requires an allocation of 70% for equities and 30% for fixed income. The equity portfolio is prudent, widely diversified, and divided into multiple asset classes to reduce risk while achieving global market returns.

On Sep. 19, 2024, a Request for Proposal (RFP) for Investment Advisor and Custodian was released by the Administration. Subsequently, 6 bidders have submitted their proposals. Between Jan. 22, 2025 and Mar. 12, 2025, the 6 bidders have presented their proposals to the Board and MISSA management. The Board is yet to make a final decision on the selection of the successful bidder.

Statutory Provisions (Under Social Security Act of 1990, as Amended, Title 49 of the Marshall Islands Revised Code)

Section 125: INVESTMENTS

  1. Investments of Fund.
    1. The reserves of the Fund in excess of the requirements for the current operations shall be invested and reinvested by or under the Authority of the Administration. The Administration shall invest its reserves to ensure the greatest return commensurate with sound financial policies; 
    2. The Administration shall have the full power to manage the investments as in its considered judgment seems most appropriate to the requirements and objectives of the Administration, including but not limited to the power to hold, sell, purchase, convey, assign, transfer, dispose of, lease, subdivide, or partition any asset held or proceeds thereof; to execute or cause to be executed relevant documents; to enter into protective agreements, execute proxies, or grant consents; and to do all other things necessary or appropriate to its position as an owner or creditor
    3. All proceeds and income from investments, of whatever nature, shall be credited to the account of the Fund. Transactions in marketable securities shall be carried out at the prevailing market prices;
    4. The Administration may commingle securities and monies, subject to the crediting of receipts and earnings and charging of payments to the appropriate accounts established by this Chapter;
    5. No member of the Board, or employee of the Administration, nor anyone in the immediate family of such member or employee, shall have any direct or indirect interest in the income, gains or profits of any investments made by the Administration, nor shall any such person receive any pay or emolument for services in connection with any investment made by the Administration. Participation in the Fund under the terms of this Chapter shall not be construed to include interest, pay or emolument within the meaning of this Paragraph;
    6. No member, employee or agent of the Administration, nor any person in the immediate family of such member, employee or agent, shall become an endorser or surety or in any manner an obligator of investments made by the Administration, nor shall any member, employee or agent be held liable for actions taken in good faith in performance of his duties;
    7. Investments may be held as physical securities in either bearer form or registered in the name of the Administration or the nominee of the custodian. Non-physical securities may be held on book entry at a depository institution selected by the custodian, or at one of the twelve United States Federal Reserve Banks;
    8. Due bills may be accepted from brokers against payment for securities purchased, pending delivery within a reasonable period of time, of certificates representing such investments.
  2. Fund Custodian
    1. The Administration shall engage one or more fund custodians to assume responsibility for the physical possession of the Administration’s assets or evidences of assets. The terms of engagement shall require that the custodian submit such reports, accountings and other information on such form and at such time as requested by the Administration; hold all assets for the account of the Administration; and act only upon the instructions of the Administration, the investment committee, or the investment consultants so authorized by the Administration;
    2. No fund custodian shall be engaged unless it:
      • is a bank or trust company regulated by the United States Federal Reserve Board, a state authority of a state of the United States, or the United States Federal Comptroller of the Currency, as is appropriate; ii.
      • has a net worth in excess of US $10,000,000;
      • has the capability to clear securities transactions through the United States Depository Trust Company I.D. System; 
      • has at least 10-year experience as a custodian of financial assets; and 
      • has at least US $1,000,000,000 in custodial assets;
    3. The contract between the Board and the fund custodian shall be of no specific duration and may be terminated at any time by either party after 30-day notice is given;
    4. The costs of services rendered under this Subsection shall be paid out of the Fund.
  3. Investment Advisor or Manager
    1. The Administration shall engage one or more investment advisors or managers to assume the responsibility and direction for the purchase and sale decisions of all assets or evidences of assets charged to them;
    2. No person, firm or corporation shall be engaged as investment advisor or manager unless:
      • the person, firm or corporation is a registered investment advisor or manager with the United States Securities and Exchange Commission in accordance with the United States Investment Advisors Act of 1940;
      • the principal business of the person, firm or corporation is of rendering investment management supervisory services;
      • the person, firm or corporation must have been in business for a minimum of ten (10) full years as an active advisor or manager of security portfolios; and
      • the person, firm or corporation certifies in writing that the assets under his/its direct investment supervision are in excess of two hundred million dollars (US $200,000,000).
    3. The Administration, in consultation with the investment consultant, may from time to time change the operation arrangements with the investment advisors or managers in order to facilitate efficient management and timely investment actions.
    4. The contract between the Administration and the investment advisors or managers shall be of no specific duration and may be terminated at any time by either party after 30-day notice is given.
    5. All costs incurred for the services provided under this Subsection shall be paid out of the Fund.

  4. Authorized Investments of the Fund may be made in:
    1. Obligations issued or guaranteed as to the principal and interest by the Government of the Republic or by the Government of the United States provided that the total market value of the investment in obligations guaranteed by the Government of the Republic shall at the time of purchase not exceed twenty-five percent (25%) of the total market value of all investments of the Administration, and further provided that the principal and interest on each obligation are payable in the currency of the United States.
    2. Obligations of any public or private entity or corporation created or existing under the laws of the Republic or of the United States or any state, territory or commonwealth thereof, or obligations of any other government or economic community which are payable in United States Dollars, or pass through and other mortgage-backed securities; provided, that:
      • the obligation is of an agency of the United States Government; or
      • the obligation is rated in one of the four highest categories by two rating agencies nationally recognized in the United States; and
      • no investment under this heading exceeds 5% of the market value of the Fund or 10% of the outstanding value of the issue at the time of purchase.
    3. Shares of preferred or common stocks of any corporation created or existing under the laws of the Republic or under the laws of the United States or any state, territory or commonwealth thereof: provided, that:
      • the purchase of such shares shall be considered reasonable and prudent by the investment advisor at the time of purchase;
      • not more than 15% of the market value of the Fund would be invested in the stock of any one corporation; and
      • not more than 25% of the market value of the Fund would be invested in any one industry group.
    4. Contracts and agreements supplemental thereto providing for participation in one or more accounts of a life insurance company authorized to do business in any state, territory or commonwealth of the United States, including its separate accounts, and whether the investments allocated thereto are comprised of stocks or other securities or of real or personal property or interest therein.
    5. Interests in improved or productive real property in which, in the informed opinion of the Board, it is prudent to invest funds of the Administration; provided that the total market value of these investments at no time shall exceed 25% of the total market value of all investments of the Administration. For the purpose of this Subsection, “real property” includes any property treated as real property by law, including any improvements thereto. The investments in improved or productive real property may be made directly or through pooled funds, including common or collective trust funds of banks or trusts, or other pooled funds invested on behalf of the Administration by the investment advisors or managers retained by the Administration.
    6. Other obligations and securities in which in the informed opinion of the Administration it is prudent to invest funds of the Administration, whether or not the securities or stocks are expressly authorized by or qualified under the foregoing Paragraphs; provided that the total market value of the investments under this Paragraph shall at no time exceed 10% of the total market value of all the investments of the Administration.

As of December 31, 2024, MISSA’s investment at MIHI/BOMI and MISco represents 9.73% and 1.29% of MISSA’s total investments, respectively. Thus, it is still within the limits of the statutory provision of the MISSA Act of 1990, as amended.

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Published 29 March 2009

RMI Social Security Investments

MISSA’s Investment Policy Statement (IPS) requires an allocation of 60% for equities and 40% for bonds/cash. The equity portfolio is prudent, widely diversified, and divided into 12 separate classes to reduce risk while achieving global market returns.

Except for MISC stocks and BOMI stocks and CDs (local investments), the Administration’s foreign funds are held and administered by Fidelity Investments IBG, MISSA’s Investment Custodian. Fidelity is independent from Investor Solutions, Inc., MISSA’s Investment Advisor, and is not affiliated or related to investment brokers.

Composition of MISSA foreign funds – In practice, MISSA only uses institutional grade no load index funds and exchnage traded funds (ETFs).

Decline in value and future outlook of MISSA’s foreign funds – MISSA’s funds have declined in value, but did not “go anywhere”. We believe that the world’s markets will recover and continue to grow in value over the life of the fund. The life of the fund is infinite and the current investment policy recognizes that markets are variable.”

Markets around the world have suffered in the current crisis. MISSA’s funds accurately reflect the performance of the markets in which they invest. During the last 18 months this has not been rewarding to investors, however over the life of the MISSA account we expect that exposure to the world’s stock markets will be quite profitable. MISSA has no cash flow needs for the foreseeable future, and has a huge allocation to fixed income of the highest quality with complete liquidity. As such, MISSA is well positioned to ride out the market downturn, and we believe that the current allocation is prudent, tailored to the needs of MISSA over the generations, and conforms to the agreed upon asset allocation.