How to Easily Update Your Community’s Investment Policy
The Coronavirus pandemic has been with us for almost two years and its impact on the financial market has many community associations asking: “how can we reasonably obtain a greater return on our capital reserve fund investments?” Many community associations’ investment capabilities are limited by their governing documents to deposits in an interest-bearing savings account or certificates of deposit, both of which have very minimal returns in the current market. While a community association has to establish a prudent investment policy that does not put the association principal balance at any significant risk, there are other equally safe investment strategies beyond savings accounts and CDs. For example, currently, the United States Treasury notes and bills are typically yielding a better rate of return and are similarly backed by the full faith and credit of the United States. Yet, many governing documents do not explicitly permit such investments. To the extent that your community’s investment policy is limited to savings accounts, CDs, and the like, you may wish to consider amending your governing documents to expand permissible investments to other instruments where the principal is similarly guaranteed by the full faith and credit of the United States or FDIC insurance. A simple amendment may yield significant returns.
If your community is currently experiencing financial issues due to the pandemic, or you just want to strengthen your investments, we invite you to contact Becker regarding possible changes to your investment capabilities. The attorneys in Becker’s New Jersey Community Association Practice Group will be able to provide appropriate advice and counsel to increase your investment return capability, all while still protecting the principal balance of your investments.