Captive investment patterns shifting as interest rates expected to decline

• Captives historically invested in cash which typically yield close to overnight/short-term interest rates
• Potential missed opportunities for captives not investing in bond market
• Parent loan backs remain popular, but following regulations is key

With overnight borrowing rates anticipated to come down this year, captives may be advised to alter their investment strategies and invest in intermediate maturity, high quality fixed-income sectors to maximise returns from a changing fiscal environment.

There are expectations that the US federal reserve will introduce a 25 to 50 basis point cut in September, and another one or two cuts in the months following are anticipated.