Quant Principle
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Club Size
Investment clubs should not be too large, nor too small. Clubs of less than 10 people may struggle to maintain effective monthly meetings. Clubs of more than 40 people may struggle to allow all of the members to participate effectively. Additionally clubs need to decide where to meet. For example a club of 5 could meet over coffee at a coffee house, where as a club of 40 would need to find a much larger meeting venue. Most clubs have rules that limit their size depending the the goals and visions of the members at the time the group is formed. If it is your first time in an investment club you will want to target joining a club of 15 to 20 members.
Meeting Time and Location
There are fundamentally 4 types of clubs, and each type of club will govern how meetings and therefore voting is conducted. Each of these will be discussed in turn:
Small Local Clubs
Small local clubs are clubs of less than 15 members who all live within driving distance of each other. These clubs will typically all choose to meet at a church, house, school or other municiple facility in the local area. Most of these clubs are looking for free or very low cost meeting facilities.
Large Local Clubs
These clubs are larger in size, but still containing all local members. These clubs will typically rent a municiple facility or company conference room on a monthly basis. The goal is to keep the cost burnden of renting a meeting facility low. Because the club has a large number of members, typically someone from the club will be able to negotiate a reasonable good price for a servicealbe time slot.
Small Online Clubs
Modern internet technology such as Skype, VoIP, and the forth coming Google Wave technology are helping people form all over the globe stay tightly connected. These clubs can create mailing lists, twitter feeds, bullitin boards, or other internet based communication techniques. Some of these clubs will require a month conference call. In some cases a video conferencing is desired. Video conferencing, webex online meetings or gotomeeting technologies are used to bring this online community into one area. These clubs may also have an annual weekend retreat to allow for a business meeting and handle the legal (non-investment) side of the business.
Large Online Clubs
These are the most complex to deal with regarding meetings. These clubs must have mailing lists and message boards. These clubs will usually want to hold conference calls monthly, and will need the services of a large conference or online meeting provider. These clubs will also have much higher entry fees, say $250 to $1000 per month contribution rate. The large contribution rate will reduce the overall overhead cost of running the club, and will ensure the members of the larger club are very serius about participating in the club. These clubs will have an annual business meeting that typically lasts 2 to 3 days. Frequently, the business meetings will be done at a resort or conference center catering to the flavor of activity desired by the club members. That activity could be golfing, skiing, mountain biking or a formula 1 race in europe.
Members of each club need to agree on where, when and how often to meet. Rules are usually set on missing meetings and how members can obtain information if they're unable to attend. The most imprtant thing for the health of the investment club is to ensure that the members all attend regularly and participate.
Categories and Competition
All of the clubs that are affiliated with Quant Principle will be assigned a category based on the risk and type of investment club. Once a club has been assigned a category, it's performance will be benchmarked against all the major indecies, as well as other investment clubs afilliated with Quant Principle. Each year the top club from each category, and top over all club will be awarded certificates of achievement, metals and a trophy for the overall winning team. While there is no financial award, remember that if you win the trophy you already got your financial award in the form of wealth generation though investment.
Partnership Agreement and the Securities and Exchange Commission (SEC)
For both legal and tax reasons, the clubs will set themselves as as either an S-Corp, LLC, Limited Partnership, Trust or other legal entity. The choice of legal structure will depend on the club size, location and type. For example a large online club and a small family based local club would have two different legal structures. The small family based local club may choose the Trust to ensure that each members heirs would benifit without the penalty of inherritance tax in the event of a death of one of the members. Where as a large online club may chose an LLC structure so that the legal structure can accomodate foreign investors and other Corporations as members. Investment clubs generally do not have to register with the SEC, but each club should determine whether or not they need to.
Monthly Contribution
A minimum monthly contribution is set during the formation of the club. This amount is usually between $50 and $1000. This amount can be large or small, depending on what the members can afford.
Investment Goals
The goals of an investment club will typically all be the same, to generate wealth. However, each club will need to write it's goals down in the operating agreement. These goals could be things like focus on realestate investments or develop a strategy to protect against inflation or any other goal that will meets the agenda of the members.
Conduct of Meetings
The conduct of the meetings will vary from club to club. Smaller clubs will have less formal meetings by the nature of the club size, where as larger clubs will have much more formal protocols and proceedures. Frequently larger clubs will have reports such as treasury reports and accounting/financial reports prepared each month. The elected officials of each club will typically prepare the reports. However, in some cases the preparation of the reports will be done on a rotation bases.
A Typical Agenda
- Role Call
- Old Business - list of any unfinished business from the previous meeting.
- Summary Of Votes - Summary of all voted decisions from the previous meeting
- NAV presentation - NAV or the Net Asset Value of the Club will indicate what each club member is worth on paper.
- Available Funds - a pressentation of Available funds to invest.
- Presentation of Current Research - each member assigned to present an investment option will present his/her research.
- Vote to Hold or invest - A vote to hold cach, sell current assets or invest in one of the investment options
- Investment Vote - A final vote on an investment strategy specifying an exact amount to invest and strategy to execute that investment.
- Other Business - Typically, other business will include proxy voting needs or other day to day business operational needs. This could also include options change a brokerage house, or discussions of couter party risk.
- Formal Close of Meeting
- Socializing as desired.
Typical Club Officer Structure
Typically all officers are elected by the members. Frequently officers have term limits. Most clubs will have a limited number of officers as follows:
- President - this person will preside over the meetings, and is responsible for ensuring that the will of the club is carried out according to the voted decissions.
- Secratary - This person will record all descisions made, and ensure that all paperwork is in order. This includes ensuring that the articles of organization and other legal documents are in order.
- Treasure/Chief Account - This individual will ensure that all members funds are deposited on time in the specified account, and will ensure that the brokerage house data is presented to members so that members can determined their asset share.
- Investment Officer - This individual will perform the transactions such as bying and selling equities. Placing orders and performing daily trading activities.