Where are we Invested? By Stu Stryker, HOA Board Treasurer
There has been lot of talk about where and how your Association funds are invested, and most of it is wrong or poorly researched. So I am going to recap the Who, What, Where, Why, and When of the community’s investments.
The first item of discussion is: we all know that the more aggressive we are with our investments, the greater the possibility of higher returns, sometimes known as “Risk-Return Tradeoff.” What is Risk Return? The Definition of “Risk-Return Tradeoff” Risk-Return is the principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost. Breaking Down “Risk-Return Tradeoff” Because of the risk-return tradeoff, the board must be aware of the risk tolerance of our community when choosing investments for our portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make more money, you can’t cut out all risk. The goal instead is to find an appropriate balance — one that generates some profit, but still allows you to sleep at night. As your Treasurer, currently, I sleep fine.
We have found the right balance. We have invested our finds according to our investment policy that provides for the best returns with minimal risk. I know there are those out there who say we can get a better return on our money, and yes we might. Or, if we took their advice, we could lose it all.
If it was all my money, then I might consider a little risk. But it’s not, it’s yours, too. In my opinion, anyone willing to risk our funds would be acting recklessly with our community’s future. So where is your money? At any given moment your money is invested in over 40 different banks. Why so many? Well, the F.D.I.C.* only insures funds at any one bank up to $250,000. So we have to spread our funds around to be safely covered. We are in major institutions like Goldman Sacks Bank, JP Morgan Chase, Barclay’s Bank, and GE Capital Bank. We are also in smaller institutions like San Lorenzo Calif Unified, Murrieta Valley Calif Unified, Palomar Calif Com, and Inglewood Calif Unified.
All of our monies that are invested are in safe and secure deposits, and these are handled for us by a company named Comerica. They are a well established firm with over 160 years of experience and are listed on the NYSE. We recently put this contract out to bid, and the Board voted to stay with Comerica at this time. Every month along with our financials there is a list of all our investments on the community website. Then quarterly, the Finance Advisory Committee and the Board reviews the progress of these investments. There is an annual meeting with Comerica to review the year’s progress. The community has a conservative investment policy that the Finance Advisory Committee reviews and submits for the Board’s approval each year. Our money is safe, secure, and invested wisely. Stu Stryker