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%.
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.
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.
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.
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.