Policy 13

Investment of reserves

The Board of Directors shall have the power to invest and reinvest association funds and to take all actions necessary and proper in connection therewith. 

Goals and Objectives:

The association’s capital replacement reserve assets shall be invested to achieve the following objectives.

  1. Promote and ensure the preservation of the reserve fund’s principal.
  2. Structure maturities to ensure availability of assets.
  3. Mitigate the effects of interest rate volatility upon reserve assets.
  4. Achieve long-term investment performance that exceeds inflation.

Investment Strategy:

Select and stagger securities so that they mature in six-month to five years. 

Reserve assets will benefit from long-term rates, which are often higher than short-term rates, while maintaining ready availability of funds and cash flow.

The association may veer from this strategy when reserving a portion for a specific expense or more favorable interest rates.  Use the most recent reserve study to match the effective maturities to the dates of the expenses.

Effective maturity may be sooner than stated maturity.

Selection Criteria:

Securities will be selected with an emphasis on these characteristics: preservation of capital; quality; effective maturity; and net after-tax return.

The approved investments for such funds are:

  1. Money Market Funds which invest in Government backed securities or which are expressly approved by the Board.
  2. Federally-guaranteed securities.
  3. Certificates of Deposit (bank only so they are guaranteed by the FDIC)
  4. Time Deposits (up to Federally-Insured amounts)

Effective 18 September 2005.
Approved by the Board of Directors in regular session 18 September 2005, John W. Mulhern, President.