1. INVESTING MEDICAL SCHEME RANDS
Ian Brown
The BHF Southern African Conference July’07 Sun City

2. Overview
Fiduciary duty dictates that investment must be a thorough process
This is a particular approach to determining your investment strategy
Defining your investment philosophy
Setting out your investment objective
Determining your investment strategy
Will not cover
Kind of assets that schemes can invest in
Governance
The BHF Southern African Conference July’07 Sun City

3. Defining your investment philosophy
What are your assets earmarked for?
Premiums paid in advance
Claims – reported and not yet reported
Savings
Expenses
Earmarked reserves
Free reserves
Overriding investment philosophy
Diversification
Scheme specific vs relative to peer measurement
Liabilities
Investment objectives
Investment strategy
The BHF Southern African Conference July’07 Sun City

4. Setting out your investment objectives
Investment philosophy
Investment objectives
Driven by each liability class
Return
Risk
Liquidity
Investment strategy
The BHF Southern African Conference July’07 Sun City

5. Determining your investment strategy
Investment philosophy
Investment objectives
Investment strategy
How you invest your Rands. Determined by
Investment case
Other parameters
The BHF Southern African Conference July’07 Sun City

6. Determining your investment strategy
Investment philosophy
Investment objectives
Investment strategy
Investment Case
Other parameters - Statutory
Limitation of equity exposure
Accounting treatment
25% solvency
“Cap” on increases in premiums
The BHF Southern African Conference July’07 Sun City

7. Determining your investment strategy
Investment philosophy
Investment objectives
Investment strategy
Investment Case
Other parameters
Statutory
BEE
Social Responsible Investing
Business
The BHF Southern African Conference July’07 Sun City

8. Wrapping-up Investment strategy will include Scheme specific
Asset allocation
Including why you include (and exclude) a specific asset class
Benchmarks
Underlying, composite, short-term, medium- to long- term
Details of your mandates
Scheme specific
Process is crucial in complying with one of your fiduciary duties
The BHF Southern African Conference July’07 Sun City

9. Investing medical scheme Rands
Questions
The BHF Southern African Conference July’07 Sun City

10. Risks Loss of capital Inability to pay claims – liquidity
Not growing assets fast enough
Non-investment
Increasing cost of benefits
Increasing benefits
Inability to increase premiums beyond some limit
Competition
The BHF Southern African Conference July’07 Sun City