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Investment classes - Coggle Diagram
Investment classes
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Domestic equities
Likely, over the long term, to produce a significant real return
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Overseas bonds
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Take advantage of interest rates in economies at different stages to the economic cycle to the home country.
Derivatives
Enable a pension scheme to reduce inflation, interest rate and currency risk
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Longevity bonds
Coupon payments linked to the mortality experience of a particular set of lives, such as a specific age group in the national population or the scheme's own lives
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Diversified growth funds
Consist of a diversified portfolio of assets with the primary aim of achieving growth i.e. capital appreciation, as opposed to paying income or dividends.
The intention behind such funds is usually to achieve growth whilst reducing the volatility associated with investing directly in growth assets
Corporate debt
Take advantage of higher potential returns available without sacrificing much in the way of security.
Contingent assets
Involves setting aside assets that will be paid to the scheme if the sponsoring employer becomes insolvent or if the funding level falls below a certain level of if other triggers are met.
Gives the scheme some security without the employer losing complete control of the assets- if the employer remains solvent and contributions are sufficient to pay all benefits, then ownership of the underlying asset will never be transferred to the pension scheme.