November 12, 2001
There are three investment funds
1. The Life Membership Fund
2. The Living Memorial Chess Fund
3. The Hurvitz Fund
1. The Life Membership Fund is funded by lifetime membership dues. The purpose of the fund is to fund the cost of the benefits for lifetime members. Since they obviously pay for these benefits up-front, the time value of money, meaning money today should be worth more than money tomorrow, should cover the life member’s costs of benefits. Theoretically, if it worked perfectly, if the life memberships were discontinued, the fund would be at zero when the last lifetime member died. A secondary goal of the Lifetime Fund is to be a cash cushion for the general funds, providing emergency funds as needed.
2. The Living Memorial Fund is funded by donations. The purpose of the fund is to pay for chess sets and boards for scholastic chess programs, especially in the inner city.
3. The Hurvitz Fund was started by a donation. We can never spend the original principal amount.
The funds have been managed by the same investment broker through Gus Gosselin. The funds have been invested in fairly safe low risk/return vehicles.
The funds should continue to be managed by the same broker with Gus Gosselin as liason. In addition, the funds should be reviewed by the board or a committee within the board on a quarterly basis, or sooner if market conditions radically change. The board or the committee should establish the goals of the how the funds should be invested and rely on the broker to make appropriate recommendations. The board or the committee should evaluate what percentage of the funds are invested in the different types of investments and gauge the return. The risk adjusted return should be evaluated against the overall market. The broker should recommend a specific asset allocation based on the board’s investment goals. The asset allocation should be agreed upon by the board or a committee.
The funds should be invested in different types of investments depending on when the money from the funds will be needed. A 12 month budget should be established. Any money known to be needed in the next 12 months should be in a money market account, drawing a high rate of interest compared to a passbook account, but incurring little risk. This should be adjusted quarterly or semi-annually. Any funds that will be needed in the next 3 years should be invested in a low risk diversified vehicle such as a balanced mutual fund. A balanced mutual fund is one which invests in stocks and bonds. Another option is to invest in “laddered” bonds. Laddered bonds are bonds of varying maturities. The portfolio is updated so that loss of principal is minimal if at all. Any funds that won’t be needed in the next 3 years should be invested more aggressively. A balanced or an equity mutual fund that concentrates on value investing, or blue chips as it’s philosophy would be appropriate. There is also room for corporate high rated bonds and utilities. Both of these can gain or lose principal value but deliver a high rate of income.
The Life Membership Fund
This should only be invested in money market, or laddered bonds. The goal is to preserve principal and produce enough income to keep pace with inflation. A money market fund would accomplish this. Part of the fund could be invested in bonds, but that could prove to be too risky. This fund should maintain the principal that people have paid in. The only obligation is to make the money grow at the rate of inflation.
A twelve month budget should be established with those funds being invested in a money market account. Funds needed in the next 36 months should be invested in a low risk investment vehicle, such as bonds or a balanced or income fund. Any funds held that don’t need to be used in the next 36 months should be invested in a balanced or equity fund to improve appreciation. The fund should be a blue chip or value fund.
This fund should have a portion of it invested more aggressively than the others. A lower risk mutual fund or combination of stocks and bonds would be appropriate. Like the others, a 12 month budget should be established with those fund put in a money market fund.
The twelve month money market investments should be enough to cover emergencies and unplanned for events.