Draft Investment Policy/Investment Guidelines For Investment Clubs in Zambia

 

Item	Detail
Introduction	The Club is duly registered partnership under Laws of Uganda, whose purpose is to pool money and invest for the members, by the members. The partners of the investment club have delegated decision making on investment matters to the investment committee, under the direct leadership of the Treasurer.
Statement of Purpose	This document sets forth the Clubs guidelines, with the purpose of guiding the Club in fulfilling its investment objectives. The Policy establishes investment standards that are consistent with all applicable laws, rules, and regulations. The provisions of this Policy are intended to aid investment committee and investment club members in making decisions about investment matters. The Policy is intended to be sufficiently specific to be meaningful to these audiences, yet flexible enough to be practical and responsive to changing circumstances.
Investment Objectives	The overall investment goal is to accumulate a net worth of USD. 10 million within 10 years (2014-2013). The club will realise to all members an average of USD. 1 Million within 10 years (2014-2013). To achieve this financial objectives, the members of the club will invest USD. 500 every month, increasing by 10% every year. The investment objective is to generate a return of inflation plus 24% per annum over the long term, after expenses. This should allow the partnership to at least maintain the real value of the assets, whilst funding annual expenditure in the region of 24% per annum. The club seeks to produce the best financial return within an acceptable level of risk. Consistent with its obligation to act as a prudent person in carrying out its fiduciary responsibility, Investment Committee seeks quality investments that will maximize the likelihood that each asset class will consistently satisfy its respective program requirements. Quality investments are those that are suitably conservative while still projected to outperform the relevant benchmarks, net of all fees and expenses, over the appropriate time horizon. Investment Committee will discharge its duties by utilizing care, skill, prudence and due diligence under the circumstances prevailing that a prudent person, acting in capacity and familiar with such matters, would use in the conduct of a like character with like aims. Finally, Investment Committee will actively pursue investments offering a reasonable risk-adjusted rate of return appropriate to each asset class, and equal or superior to comparable investments available to the asset class.
Attitude to Risk	Investment is about seeking the most returns, at the least risk. This means our club must analyse all options presented for investment, by members, or non members, based on risks expected, and the return projected, and not on emotional likes and dislikes of the members. The club relies on the investment returns as well as monthly contributions of members and non members to build its portfolio. The key risk to the long term sustainability of the fund is inflation, and the assets should be invested to mitigate this risk over the long term. The other risks for cross border investments include foreign currency risk and hence investment will be concentrated in diversified portfolios to prevent the capital value fluctuation.
Roles and Responsibilities	Treasurer The Treasurer is the Chairperson of the Investment Committee, and has ultimate and final authority over and responsibility for the actions of the Investment Committee and the fulfillment of its legal mission. The Treasurer is responsible for managing the moneys of the various programs to preserve principal, provide liquidity, and generate returns that are consistent with both programmatic requirements and legal limitations. To achieve these objectives, the Treasurer has the right and responsibility to manage the various employees, agents, and contractors of club. The Treasurer may designate specific agents, such as the broker, banker, investment advisors, as well as lawyers, and investment club members, to carry out activities in fulfillment of these responsibilities. Acting alone, or through agents in the Investment Committee, the Treasurer shall: establish reasonable and consistent investment objectives, policies, and guidelines that will direct the investment of each program’s assets in accordance with applicable law, meet the liquidity needs of each program’s participants, prudently and diligently select qualified financial professionals in pursuit of these objectives, establish performance goals for each investment manager and communicate these goals in writing to the managers on a timely basis, regularly monitor the performance of the financial professionals to evaluate progress in attaining investment objectives, develop proper procedures to monitor compliance with this Policy, and periodically review and revise the Policy to reflect changing circumstances or experiences. The Treasurer seeks quality investments that will maximize the likelihood that each asset class will consistently satisfy its respective program requirements. Quality investments are those that protect principal while still projected to outperform the relevant market benchmarks, net of all fees and expenses, over the appropriate time horizon. Finally, the Treasurer will actively pursue investments offering a reasonable risk-adjusted rate of return, appropriate to each asset class and equal or superior to comparable alternative investments available to the Asset class. Investment Committee The club shall utilize an Investment Committee to advise and assist the Treasurer in the discharge of his/her duties. The Investment Committee shall consist of the treasurer, who shall Chair meetings of the Committee; the Deputy Treasurer, who shall serve as Secretary to the Committee; and other persons whom the Treasurer may wish to appoint as per club rules and constitution. The Investment Committee shall meet once each calendar month and on such other occasions as the Chair shall direct. A quorum for each meeting shall consist of not less than half the members of the Committee. Meetings may occur in person, by telephone conference call, or by such other means as the Chair deems to be appropriate. The Investment Committee’s responsibilities shall include the following, as the Treasurer may direct: Provide advice and recommendations the Treasurer may require pertaining to investment policy and investment issues. Evaluate investment strategies, deals, and propositions by members and particular investment options. Review waivers and exceptions to this Policy. Supervise and evaluate the performance of the financial professionals on behalf of the Treasurer. Monitor compliance with this Policy. Review progress towards achievement of the club Department’s investment objectives. Perform specific tasks and functions identified in this Policy or as directed by the Treasurer. Suggest amendments to revise this Policy as necessary. Investment Teams In addition to the investment committee, the club shall; have several investment teams to promote compliment ability, and provide new ideas to handle any given resource.  Each team is given an amount of money, and asked to identify potential investment options, and go ahead and invest. Financial Advisors The club may retain one or more financial advisors to assist The club in achieving the investment objectives of the programs. The financial advisors shall offer advice concerning the management and investment of the programs’ assets that are consistent with the investment objectives, guidelines, and constraints established in the Policy. The investments under the specific purview of an investment advisor shall be defined in the initial employment contract. If no limiting scope is specified, it is assumed that the investment advisor is to offer services covering the entire scope of Club’s investments. The financial advisors’ specific responsibilities shall include the following: Create quarterly and annual reviews of investment performance as detailed below. Conduct investment manager searches and make recommendations regarding the selection, scope of responsibility, and discharge of investment managers as required. Propose benchmarks for manager’s evaluation under their purview for the Treasurer’s final decision. Assist in the development and periodic review of the Policy. Design and present formal written recommendations for asset allocation plans and investment horizons for the respective programs, basing these recommendations on, and expressly including reference to, the investment risk tolerances of the various programs. Communicate matters of policy, investment manager research, and investment manager performance to Treasury. Recommend, in writing, appropriate alternative investment strategies.
Review of Investment Performance	On a quarterly and an annual basis, the financial advisor(s) shall prepare and submit to the Treasurer for Investments reports on investment performance for those investments that fall under their defined purview and responsibility. Both quarterly and annual reports should provide a comprehensive review of the investment performance of the portfolios for each program covered, comparing the performance to appropriate, pre-determined benchmarks and similarly situated portfolios, as directed by Treasury, as well as any analysis or review of any other such matters as the Treasurer for Investments may direct. The annual report shall also provide a comprehensive review of the aggregate investment performance of each program in comparison to the fiscal obligations or expenses for the program projected over a time horizon prescribed by Treasury, commentary on the performance of the managers and the portfolio as a whole, and suggestions for changes to the investment strategy, asset allocation, and investment policy for each program. The review shall also address any other matters that the Treasurer directs the financial advisors to consider. The annual report shall be submitted no later than the last business day of February following the end of the preceding calendar year, or at some other such time as the Treasurer may direct.
Investing In Members (Member Loan facility)	The club should also make it possible for members to borrow money (for investment, not personal uses). This should be accompanied by provision of security, guarantees, and or postdated cheques, together with a clearly written contract for loan of money, and repayment schedule. The club will relax and lower interest rates, and loan processing fees, in line with the spirit of togetherness since the borrower this time is ‘family’.
Investment Ideas/Deals	All members to propose an investment project, business deal, and or to invite non members to submit investment proposals, including ideas for funding, every month. Any member who does not actively participate in seeking out investment opportunities is a let down to the club, and should be encouraged to pull up their socks, and be helped to seek out deals, and or generate investment ideas. This is one area where continuous learning, through guest lectures, and or reading books/watching movies, and or joining industry associations like a national investment clubs association or venture capital association, or a business idea lab, is an added advantage.
Allocation Considerations	Investment Committee shall determine the asset allocation strategy for each Asset class under management. As the funding levels in some Asset classes can vary significantly throughout the course of the year, Investment Committee may determine an optimal range for each Fund to be allocated to asset classes without requiring adherence to a fixed target. In determining the asset allocation strategy, the Treasurer will make full use of all available asset classes, ensuring that the allocation meets the following goals: The allocation must provide sufficient security and an appropriate amount of liquidity for each Fund. The assets in the Asset classes should provide a prudent level of diversity to reduce risk. The Treasurer may seek to introduce assets into the funding structure which are not correlated with conventional indices to increase diversity and reduce risk. Consideration of the time horizon and risk tolerance of each Fund is essential. Funds that can experience greater short-term volatility or reduced short-term liquidity should be compensated for that flexibility with increased potential returns.
Dividend Reinvestment Policy (DRIp)	If available at no cost, the Club shall instruct the broker to automatically reinvest dividends in the stock generating the dividends. An investment club should clarity whether its foundation is growth or income. If the purpose is to grow, then all investment returns, whether in form of interest or dividend should be reinvested for a given period of time; but if the focus is income, then dividends should be issued. And if the members really need ‘something’ to show progress, then the club can purchase for members gift hampers every end of financial year from earnings, as part of expenses (hence not taxed), so as to build member morale as happens in cooperatives.
Asset Allocation and Diversification	The club's assets can be invested widely and should be diversified by asset class, by manager and by region. Asset classes could include cash, bonds, equities, property, hedge funds, structured products, private equity, commodities and any other asset that is deemed suitable for the club. The investment committee are charged with agreeing a suitable asset allocation strategy with the investment managers, which is set so as to achieve the overall club investment objective. No more than 25% shall be invested in any one market sector. Market sectors are as listed below\ (in accordance with Rwoth Ramogi’s classification of 3 investment vehicles, and 12 subcategories of investment products. Personal Branding 1.                Coaching, mentoring, training, instructing, consulting and  counseling Financial Instruments 2.                Bonds 3.                Stocks 4.                Cash 5.                Derivatives Alternative Investment Products 6.                Property (real and movable, tangible and intangible) 7.                Collective investment schemes (CIS) 8.                Forex 9.                Commodities 10.             Collectibles 11.             Private equity (venture capital, angels, private placement and distress investments) 12.             Insurance
Period For Holding Investments	All investments must be held for a minimum of 30 days. Provided that there is no risk of loss of capital, or loss of opportunity that requires liquidation of particular investment to participate in another option.
Procedure For Investment Selection / Investment Process	Anyone can propose an investment, including club members, or guests invited to make an investment pitch to the investment committee of the club, directly, or through documents sent. The investment proposition will be analyzed based on the investment policy of the club, and a decision made within 3 days, and not later than the date of the next meeting of the club. Further, once proposed, the ideas or options are analyzed on the basis of risk and return model, based on the clubs strategic plan, hence, expected earnings should guide the decisions. The final decision to invest shall be made by the treasurer, as chairperson of the investment committee.
Currency	The base currency of the investment portfolio is Shilling. Investment may be made in non‐Shilling assets, but should not exceed 40% of the total investment portfolio value. Hedging is permitted.
Credit	The club's cash balances should be deposited with institutions with a minimum rating of A‐ or invested in a diversified money market fund. Deposits should be spread by counterparty, subject to a maximum exposure of 1 million per institution. Bond exposure should be focused on investment grade issuers. Credit to members, inform of debt investment for the club, should be issued such that at any given time, the money out in credit should not be more than 25% of the net worth of the club. Credit to members should be such that the amount given in credit is charged at an interest rate of 5%. Credit to club members will be given without guarantee. Credit to members will be worth 50% of members contribution.
Liquidity Requirements	The Club aims to distribute grants of between £200k and £500k per annum. This can be funded from both income and capital. The trustees wish to keep at least 70% of the assets in investments that can be realised within three months. To allow for volatility of capital values, the trustees wish to maintain at least 3 years worth of budgeted grant making in cash or lower risk liquid investments. A minimum of 2% of the total assets should be kept in cash or near cash investments at all times.
Prohibited Investment Activity	The club prohibits investing in the following: Options and futures contracts, Trading on margin, Commodities,
Time Horizon	The club is expected to exist in perpetuity and investments should be managed to meet the investment objective and ensure this sustainability. The club can adopt a long term investment time horizon.
Ethical Investment Policy	The club assets should be invested in line with its aims. The trustees do not wish to adopt an exclusionary policy, but individual investments may be excluded if perceived to conflict with the club's purpose.
Management, Reporting and Monitoring	The investment committee has responsibility for agreeing strategy and monitoring the investment assets. The committee meets six monthly to review the portfolio, including an analysis of return, risk and asset allocation. Performance will be monitored against agreed market benchmarks, and against the investment objective of inflation plus 4% over the long term. The investment committee is to report formally to the full trustee board on at least an annual basis. This report should include a review of asset allocation strategy, performance, risk profile and consistency with long term investment objective.
Financial Statements	A monthly valuation statement shall list all assets, at cost and market values, and liabilities of the club as of the last business day of each month. It shall also compute the value of the Partnership. The Treasurer shall also prepare a summary statement of capital accounts maintained in the name of each Partner, as of each valuation date, including the maximum allowable contribution for the current meeting. The annual club accounting shall show the distribution of dividends, interest, short and long-term capital gains, and expenses. The treasurer shall keep two accounting systems, one purely for the assets performance, and one for management and operations costs.
Bank(S) And Broker(S)	The Club may maintain checking account(s) at the bank(s) that the Club deems necessary or desirable, or may operate only with the brokers’ account or money market fund linked to the brokerage account. The Club may engage one or more broker(s) as it deems necessary or desirable. The Club shall request the bank or broker to send statements directly to the Treasurer, and the Treasurer will send the electronic statement to the Secretary and, if requested, the President OR statements will be made available online where all partners can view the statements.
Payments	All monies for investment consideration for the month must be deposited in the bank account and the banking slip delivered to the treasurer, by email, or physically, by the commencement of that month’s meeting. Any monies contributed after this time shall be held for investment consideration until the next monthly meeting.  If available and desired, Partners may arrange for automatic monthly withdrawal from the Partner’s personal checking or other account to be deposited into the Club account. Any expense for this shall be borne by the individual Partner. The Club shall assess a fine against Partners for late, or part, or both late and part payments of monthly dues at 10 % of amount expected. Monthly payments shall have club dues taken out first, with the remainder to be applied to club investments. Non members can also invest in the club. Their contributions should be considered as loans/bonds to the club, payable with interest within a given time period. The investment dues are to paid every first week of the month to the club’s bank account. Membership dues of twenty dollars are due upon joining the club and at the beginning of each calendar year.  If a member becomes 1 month delinquent on dues, the delinquent amount will be transferred from the individual’s club share to the club’s general account. In the case of a partial or full withdrawal, payment will be made in cash.  Where cash is transferred, the Partnership shall transfer to the partner (or other appropriate entity) withdrawing a portion or all of his interest in the Partnership, an amount equal to the value of the capital account being withdrawn, less the actual cost to the partnership of selling securities to obtain cash to meet the withdrawal.  The amount being withdrawn shall be paid within 10 business days after the valuation date used in determining the withdrawal amount.  The valuation date used will always be the subsequent valuation date to the withdraw request date.
Expense Reimbursement	From time to time, the Club may request a Partner to purchase goods or services for the benefit of the Club. Upon request of the Partner, the cost of such expenditure shall be reimbursed by the Club upon furnishing receipts for such purchase. The President may authorize expenditures of less than $25. The total of such Presidential expenditures shall not exceed $125 in any calendar year. Expenditures of $25 or more shall be authorized only by a vote.
Amendment & Waiver Of Guidelines	These guidelines may be amended from time to time upon majority vote of the Partners. Amendments shall become part of the Bylaws upon the effective date specified therein. If any part of these guidelines is ruled ineffective or invalid by a court of law, the other parts will remain in full force and effect. These guidelines shall be construed in accordance with the Partnership Agreement and, in any conflict, the Partnership Agreement shall rule. These guidelines may be waived on individual transactions upon a vote of the Partners.

 

 

 

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