No-lympics pointed out this article in todays Province. Apparently two BC condo strata councils have lost substantial amounts from their reserve funds by putting that money in higher risk /higher return investments than the legally allowed bonds, GICs or bank accounts.
“It’s been going on for years,” says Gioventu. “The first time I had to deal with it was nine years ago. People get greedy and look for shady deals. But nine years [ago], we had a pretty big drop in mutual funds and we had stratas investing in mutual funds. That was probably the first time it popped up on the radar screen.”
Legislation limits the type of investments in which condo reserve funds can invest.
The Strata Property Act Regulations, Section 6.11, says permissible investments include government bonds, GICs or simply holding the money in a bank account.
In most cases, investing in equities is not permitted.
The strata council in the Okanagan, however, alleges it was misled by an investment adviser.
“Our strata council has done something rather stupid,” wrote one strata member to Gioventu’s Condo Smarts column, published every Sunday in The Province.
“In 2005, our treasurer invited a broker from an investment firm to talk to our council about managing reserve funds. We took advantage of the advice and decided to place our contingency funds with the investment broker to gain the highest yield possible. Unbeknown to us, the funds were extremely risky.”
While the strata earned more than 10 per cent in 2006, the portfolio is now worth half its value, said the strata member.