Case Study

We were hired to work with a self-insurance fund sponsored by a group of non-profit institutions. The fund was faced with an unusually high level of claims that were draining the fund's reserve assets. This resulted in steadily rising insurance premiums that were jeopardizing the membership base. The reserve fund's investments were restricted by state insurance regulations to a prescribed list of asset classes, securities, and portfolio weights. In addition, the insurance department's rules require periodic reporting to demonstrate compliance.

The first step was to facilitate consensus among board members to define the fund's goals and objectives, including expected returns and risk levels. This resulted in a written investment policy to guide the investment process. YDA spent considerable time studying the appropriate mixes and investment portfolios required to bolster returns with very low risk. YDA recommended a policy allocation of 25% in a diversified equity portfolio made up of domestic, international and emerging market stocks. This allocation was balanced by a 75% allocation to high-income government guaranteed securities. Result: The aggregate portfolio has achieved the client's long-term return objective of 6% with a negligible monthly draw-down and without a negative quarter. Total management fees are around 30 basis points. In addition, we have taken over the responsibility to report annually on the fund's compliance with Department of Insurance regulations.