CAI-NJ December 2021

UPDATE YOUR INVESTMENT POLICY By Martin C. Cabalar, Esq., Becker & Poliakoff, LLP

...you may wish to consider amending your governing documents to expand permissible investments to other instruments where the principal is similarly guaranteed...

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T he 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’ invest- ment capabilities are limited by their governing documents to deposits in an interest-bearing savings account or certif- icates 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 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 permissi- ble 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 invest- ments, you should consult with your accountant, legal counsel and the association’s financial advisor regarding possible changes to your investment capabilities. Your professionals will be able to provide appropriate advice and counsel to increase your investment return capability, all while still protect- ing the principal balance of your investments. n

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