HIGH ON THE agenda of many dinner conversations these days is the topic of investing offshore. With persisting uncertainty around our country’s economic future, we understand that many South Africans may feel unsettled about their own financial futures. At Coronation, we believe that, no matter the current market sentiment, it’s always a good time to consider the long-term benefits of owning a balanced portfolio of both international and domestic assets. It’s not a question of when to invest offshore, but rather how. From a young age we are taught not to put all our eggs in one basket. This truism stems from the value of diversification, which is the key benefit of having at least some of your assets offshore. International assets make your portfolio better by diversifying economic-, jurisdictional-, currency-, industry-, and company-specific risks, without necessarily reducing expected long-term returns. The more than 5 000 investable shares in the global universe allow access to growth opportunities, industries and geographies not available in the local equity market, which consists of only 160 investable shares. NO ASSET CLASS WINS ALL THE TIMEWhile much of the current emphasis is on how global markets performed better than the local market over the past decade, as shown in Table 1, this has not always been the case. Over the past 20 years, the local market materially outperformed global equity markets, as the outcomes through most of the 2000s were very different to their more recent performances. Another point to ponder is how US equity market returns dominated over the past decade. There is no guarantee that this outcome will be repeated over the next decade, especially considering the high valuations base in the US. If you are interested in unpacking the relative performance of local and global markets further, you can read the brief summary of key market events over the past two decades. It is worthwhile to highlight that eventual return outcomes are sometimes surprisingly different to the consensus view informed by the events of the day. For example, the rand weakened materially in 2000 as a result of a global risk-off episode that impacted all emerging markets, despite South Africa achieving its first investment-grade rating. Then, in 2001, the local share index managed to outperform the global index despite a 37% fall in the value of the rand. Another way to look at this is to consider the correlation between relative equity market performance and the dollar/rand exchange rate. The rand depreciated against the dollar in 12 of the last 20 years, but global equity markets outperformed the local equity market in only eight of the 20 years, as shown in Table 2. One of the reasons for this discrepancy is that most of the underlying business activities of the companies that happen to be listed on the JSE take place outside of South Africa. HOW TO GAIN OFFSHORE EXPOSURE If you are invested in one of our multi-asset class funds, you already have a considerable international allocation. This allocation consists of direct offshore exposure and the portion of the value we place on local shares that derives from economic activity outside of South Africa. Figure 1 shows the effective rand-hedge exposure across our multi-asset class funds over time. For our Balanced Plus and Market Plus funds, with long-term growth objectives, this is typically more than 50% of the portfolio. For the more conservative Capital Plus and Balanced Defensive funds, which have near-term capital preservation targets in rands, the range is somewhat lower. Each of these funds provide the easiest way to gain hassle-free international exposure, as you mandate us to manage the scope of international allocation on your behalf. In addition, it’s easy to top up your investment or to draw an income from these funds, as they are accessible with low minimum investment requirements, and can be used in tax-efficient investment vehicles such as retirement annuities and tax-free investments. If you want more international exposure, you can also invest in rand-denominated international funds. You may want to do this with your discretionary (non-retirement) savings in order to further diversify your risk. The reality is that by living, working and owning a home in South Africa, you already have significant country-specific risk, arguing for an additional international allocation. These funds, such as the Coronation Global Managed and Coronation Optimum Growth funds, allocate all or most assets to international investments, while remaining easy to use and access, as the funds are established in South Africa. However, while they provide full economic diversification, they still operate under the laws of South Africa and therefore do not diversify jurisdictional risk. One example of jurisdictional risk is that South Africa still enforces exchange controls, which limit the amount that asset managers can invest outside of South Africa on behalf of clients1. While highly unlikely, these limits may be reduced in future, which may lead to an enforced and unwanted reduction in offshore exposure. If you have a substantial amount to invest offshore, you can externalise your rands and invest in a fund incorporated in another country, most often in the EU. In this case, the laws of the country of incorporation govern your investment. Coronation offers a range of funds incorporated in Ireland with the same economic exposure as our rand-denominated international funds, but with the added benefit of jurisdictional diversification. The downside of investing via this route is more complex administrative requirements due to cross-border banking, and you may have to apply for South African Revenue Service clearance if you want to invest more than the annual R1 million general offshore allowance. These funds have a minimum investment amount of $15 000. REASON MUST BE YOUR GUIDESo, the message is to cut through media hype of doom and gloom, and to keep your eye on your goals when allocating to international assets. It is also useful to avoid the myopia of the moment and take some time to consider the bigger picture. When you unpack historical market returns, it becomes evident that investing is about well-considered diversification across asset classes and geographies rather than extreme, sentiment-driven moves between local and global assets. Key market events since 2000: a tale of two contrasting decades Comparing local vs global market performance* To invest in an offshore account contact Kevin email:invest@daberistic.com tel:(011)658-1333 Source: Coronation
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Much debate has taken place around the proposed National Health Insurance Bill (NHI). Discovery’s overall position on NHI is unequivocal. We would like to provide some additional information to answer any questions you may have. Discovery Health is supportive of structural change that assists in strengthening and improving the healthcare system for all South Africans, and we are committed to assisting where we can in building it, and making it workable and sustainable, seeking to ultimately strengthen both the public and private healthcare systems for all South Africans. While the NHI is a huge, complex and multi-decade initiative and a considerable amount of debate and effort will be required to make it workable, in this brief note, we review some of the key issues arising from the NHI Bill and then look at the NHI policy process going forward. The role of medical schemes once the NHI is implemented A central issue is the future role of private healthcare and medical schemes once the NHI is implemented. The NHI Bill states that when the NHI is ‘fully implemented”, medical schemes will not be able to provide cover for services that are paid for by the NHI. Discovery's strong view is that limiting the role of medical schemes would be counterproductive to the NHI because there are simply insufficient resources to meet the needs of all South Africans. Limiting people from purchasing the medical scheme coverage they seek will seriously curtail the healthcare they expect and demand. It poses the risks of eroding sentiment, and of denuding the country of critically needed skills, and is impacting negatively on local and international investor sentiment and business confidence. Crucially, by preventing those who can afford it from using their medical scheme cover, and forcing them into the NHI system, this approach will also have the effect of increasing the burden on the NHI and will drain the very resources that must be used for people in most need. Discovery also believe that limiting the rights of citizens to purchase additional health insurance, after they have contributed to the NHI, would be globally unprecedented and inappropriate. In virtually every other country with some form of NHI, citizens are free to purchase additional private health insurance cover, including cover that overlaps with services covered by the national system. A restriction on choice of medical scheme cover is not dissimilar to limiting the rights of citizens to purchase private education for their children or private security, on the basis that the public system already provides state schooling and security services. Given the substantial harms that this approach of limiting the role of medical schemes will cause, it must surely be strongly justified for good policy reasons. However, we are not aware of any sound policy reason or justification that has been put forward for this approach. Discovery believe that medical schemes will continue to cover all of the healthcare services which they currently cover for the foreseeable future for a number of reasons:
Discovery is already actively engaging with the Department of Health on this critical set of issues, alongside the broader business community, and we will continue to do so in order to ensure that medical schemes and private healthcare remains a critical part of the healthcare system, together with the NHI. The financing of the NHI system The Bill makes no reference to the likely costs of the NHI once fully implemented. Any fundamental change that improves quality and access and seeks to contract with private providers will require substantial additional funding. We understand that National Treasury will soon be publishing a costing document, and that this is likely to be based on an incremental approach to providing NHI benefits. The Bill specifies that payroll taxes and a surcharge on personal income tax could be considered as sources. Such taxes would need to be determined by National Treasury. At the presentation of the Bill, the Minister of Health indicated that no tax changes are envisaged over the 3 year period of the current Medium Term Expenditure Framework. In our view, there are material challenges to raising new revenues to supplement the current government budget for healthcare, and this is unlikely to change in the foreseeable future. This suggests that the rollout of the NHI will be slow unless there is a substantial improvement in the country’s economic prospects. The role of private hospitals and health professionals The Bill envisages that the NHI Fund will contract on a voluntary basis with private hospitals and health professionals to supplement the current public sector delivery system. For the foreseeable future, we expect that the NHI will contract with some GPs to supplement primary care services, and also that it will contract for certain high priority services to address specific gaps in public sector provision. If this is achieved, it will already be a significant step forward. Beyond that, we expect that the vast majority of NHI services will continue to be delivered by public sector clinics and hospitals, and that private hospitals, specialists and other providers will continue to be funded by medical schemes. South Africa is blessed with a committed, highly skilled and world-class healthcare professional community. These professionals work hard, provide excellent care and are committed to our country. We will work hard to defend their rights to fair remuneration, to an optimal working environment that promotes sustainability and ideal patient care, and to retaining and supporting them within our broader healthcare system. The NHI Bill Process The NHI Bill has been tabled in Parliament and is now in the hands of the Portfolio Committee on Health, which will hold formal hearings in early 2020. Discovery is actively participating in a direct engagement process between Business Unity South Africa and the Department of Health to discuss a number of issues of common interest, including the NHI. There is also a parallel process within NEDLAC, offers further opportunities for business, labour and government to engage on the final content of the Bill. We expect the Bill to be finalized sometime during 2020 at the earliest. Concluding remarks While the NHI Bill certainly raises some serious concerns, we recognize the need for structural change to improve healthcare for all in SA. We believe this should leverage the strengths of the key elements of the current public and private healthcare systems, and we remain confident that the final outcome will be rational and workable. Discovery is committed to playing its role in building a positive future - for our members, South Africa’s healthcare professionals, and for all South Africans. Frequently asked questions 1. New Year, new me: Some of your New Year resolutions might require some new equipment such as a bicycle, trainers or a set of golf clubs. This should not be seen as a shopping opportunity but rather one to save your bank balance. Before you buy new equipment, try your local pawn shop or one of the many online second hand sites for easy savings. 2. No joining fees: This is the year you get fit, healthy and learn something new. Before joining the gym, a cooking class or golf club, ask around. You can save on expensive joining and membership fees by learning the basics from YouTube or a friend or family member. You will be surprised what you can learn online, anything from yoga to making the perfect espresso to bird watching. 3. Change your bank balance, by changing your bank: There have been many changes in the banking industry over the last few years, including lower bank charges and bundle options. When was the last time you checked what your monthly banking charges are, and what value you are getting for those fees? Look into the option of switching to another bank which offers you a more suitable solution for your needs and banking habits. 4. Hit “unsubscribe”: Leave your bad money habits in the past. Identify the clubs, daily deal newsletters and subscription services you are no longer interested in and unsubscribe. By eliminating the “loyalty fee” on an unused rewards programmes or magazine subscriptions your bank balance will improve month by month. 5. Paying off your debt is in your best interest: A quick way to increase your disposable income is to pay off as much debt as possible. By decreasing the principle amount owed you will decrease the interest payments. For maximum effect start with the high interest loans first like credit cards and store accounts. 6. Just Google it: Who needs a shopping assistant when you have Google? Google will allow you to search, compare and locate the cheapest prices for just about anything. A Google search is a quick way to increase your bank balance by not overpaying for goods and services. 7. Maximise your financial health: Financial health is just as important as mental and physical health. You can check your financial health by calculating your cash flow and net asset value. To increase your cash flow, eliminate any unnecessary expenses like bottled water and daily cappuccinos and increase your asset value by reducing your debt. 8. Do It Yourself: The house needs cleaning, the car needs to be washed or the roof needs to be painted. Instead of hiring a cleaning service or handy-man, get into the habit of doing it yourself. This will save you money and maybe you’ll burn off a few calories which will help with some of the other New Year’s resolutions. 9. Ask a professional: When you need financial advice it is okay to ask a professional. Speak to an accountant, debt counsellor, or financial planner. Making use of an outside party with industry knowledge can help you find efficient ways to manage your finances, save and set a plan into action to achieve your financial New Year resolutions. 10. Grow your income: Turn your passion into cash by teaching what you know and love to those willing to learn. It can be as easy as teaching computer skills to the elderly at a retirement home, or your ball skills at the local primary school. Or be even more ambitious by going back to school and studying to acquire new skills to further your career. Remember saving is a process and not a single event. The easiest way to save a lot is to save a little each day. To help review your financial portfolio contact Kevin email: invest@daberistic.com to book a financial planning meeting Source: Alexander Forbes. Around this time of the year, we would like to remind you to consider topping up your retirement annuity fund. According to the current legislation, you may contribute up to 27.5% of your taxable income (strictly speaking, non-retirement funding income) to a retirement annuity fund and enjoy tax deductions. As 28 February is the end of the tax year, you must calculate and pay the additional amount to your retirement annuity prior to this date, in order to qualify for tax deductions and tax refunds. Below is an example of topping up your retirement annuity: Mr Jackson has a monthly salary of R50,000. In December he received a bonus of R100,000. Every month he contributes R3,000 to a personal retirement annuity fund. His annual income is then R50,000*12 + R100,000 = R700,000. The maximum tax-deductible contribution to retirement annuity is R700,000 * 27.5% = R192,500. Over the year he has contributed the following to a retirement annuity fund: R3,000 * 12 = R36,000 The additional amount he may top up in his retirement annuity (RA) is R192,500 Less R36,000 R156,500 To top up your retirement please contact invest@daberistic.com Did you recently get married? Move in with your partner? Or maybe you made some adjustments to your property. Every year, our lives change and every new year we ‘spring clean’ the clutter to make way for the new resolutions. But more often than not there is one thing we always put on the back burner. The dreaded, yet all-important, insurance contract. Your contract with your short-term insurer is automatically renewed, but for most consumers it simply ‘ticks over’ without having scrutinised it to check that you’re neither over or under-insured. This is all well and good, until disaster strikes. The ombudsman for short-term insurance, Deanne Woods, repeatedly encourages consumers to review their insurance policies every year. At Santam, we recommend ‘spring cleaning’ your insurance policy may even help you save some money in the long run. Marius Neethling, Personal Lines Underwriting Manager at Santam gives the below four tips on how you can ‘spring clean’ your insurance policy to help you save some money in the long run. 1. Adjust the amount you’re insured for: The main reason for reviewing your policy is to make sure that you are insured for the right amount – this is what insurers call the ‘sum insured or limit of indemnity’. Over the course of the past year, you may have bought a brand new bicycle and a couple of other items, all of which means you will have needed to adjust the contents of your home insurance cover. 2. Underinsurance: This may sound obvious, but, with the exception of motor insurance (see below), the value of the goods insured should equal what it would cost to replace them today, not the original purchase price. Very often we find that goods remain insured for their original value – for example, a leather couch bought 10 years ago would be insured for R6 000. But to replace the couch would cost R20 000 today, so you could be left very disappointed when you leave the shop with an inferior and smaller couch than the one it replaced. For this reason, insurance companies usually automatically adjust your sum insured each year so that the covered amount keeps pace with inflation, and this should be made clear in your policy document. 3. The structure of your home: If you’ve enhanced the value of your home by replacing your roof, redoing your kitchen or improved your home by installing a swimming pool, you need to increase the amount your house is insured for too. Your house (its structure) and your belongings (the contents of your home) must be insured at their replacement value – that is, what it will cost you, at the time of a claim, to replace/rebuild the building (your home) or belongings with similar, new structures or items. 4. Your car: Your car should be insured at a ‘reasonable market value’. Reasonable market value is the retail value, which is what a dealer would sell it for, considering its age, the mileage, the condition of the car and any extras. If you’re wondering what your car is worth, you are requested to contact your broker or Santam directly (should you not have a broker) to work out the reasonable market value of your car with a car calculator provided by Santam. Neethling concludes, “It is important to ensure that you update your insurer about any major changes for many reasons to avoid any disappointments when an incident that requires you to claim from your insurer occurs. Help us help you by ensuring that you are adequately insured for your household contents and vehicle.” To review your personal or business insurance please contact Edmond email: shortterm@daberistic.com Source: Personal Finance Did you know,that you can request extended chronic or acute medication when you are travelling out of South Africa for more than a month or up to 6 Months. This benefit is only available if you will be travelling more than a month or up to 6 months. Discovery will review the request only when you need the extra supply of chronic or acute medication because you will be outside the borders of South Africa for longer than one month or up to and no longer than six months. Please note the maximum period for extended supply of medicines Discovery will consider Months. The request will be declined if its longer than Months If you change Medical aid plan, cancel membership or if the membership is suspended during the period for which the extended medication is approved, member will be liable to pay the cost themselves. How to activate this benefit or what you need to do!
Source: Discovery |
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January 2025
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