Participants who have elected this option are exposed to a higher degree of risk, because of the possibility that unfavorable stock market performance could result in losses, for the potential of greater long-run returns. Over the long-term, stocks have outperformed most other types of investments and Variable Fund returns have exceeded Fixed Fund returns. The Variable Fund's investments are diversified among different types of stocks to help reduce risk. However, unfavorable markets resulted in losses in two of the last ten years. The Department of Employe e Trust Funds computes those amounts.
Holdings are diversified among small, medium and large companies.
Four portfolios are managed internally and two externally. SWIB also invests in three funds that contain the same companies as the market indices. Investments are divided among an internally managed portfolio, externally managed portfolios and an index fund. They include obligations of the US government and its agencies as well as high quality commercial bank and corporate debt obligations.