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CDIC Insurance and Secured Funds
A new board member raised issue of CDIC insurance coverage for Reserve Funds in light of recent bank failures… does anyone have insight on this? As I understand it, every $100,000 in contributions would need to be deposited with a unique financial institution (per CDIC guidelines). We are investing in High Interest Svgs and short-term GICS since we are a new development (<5 yrs) currently so would only need 3 separate deposits with qualifying institutions but when the RF reaches $1M plus, it would become very cumbersome.
Given the above, I’d say our risk tolerance is very low so anything other than GICs would likely not be approved either. Although we are a new complex, we have already identified some repairs that will impact reserve funds. Our fund study is about 3 yrs old, development was incomplete at time of study. Construction is now finished, I think a new RFS should be done now to ensure our contributions will meet our current needs, rather than wait until it is due at 5 yr point.
Interested in hearing thoughts from seasoned condo owners/board members … Thanks!
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4 Replies
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The first paragraph is correct. You’ll find institutions have different branches within, for GIC’s and other reasons… for instance, Oaken was the highest in Calgary for GIC’s at 2.1 % prior to BoC rate hikes. Within Oaken there are 2 branches allowing for $200k insurable (Oaken Home Trust and Oaken Financial? I can’t recall). Once you’ve hit around 3 or more institutions it could be difficult to maintain but GIC’s are straightforward and creating an excel or google sheet is quite simple… You’d be losing much of your gains hiring a manager who charges basis points (look for one that charges an annual rate). The best returns are at 5 years and if you sort yourselves out correctly you could have 1 or 2 special meetings a year just to plan investments and review. With 1 million and CDIC coverage you’ve got 10 purchases… over 5 years… that’s only 2 maturing a year. If a 5-year ladder isn’t the appetite, then try to plan the maturity cycle timing to be tight and pre plan your options and the meetings with institutions within that week.
Schedule 2 doesn’t allow for much other than GIC’s but it does allow for some great dividend stocks and bonds. A conversation is best held when you have multiple board members with financial backgrounds.
Could you have a Reserve Fund Update instead of a new study? That may be a little more affordable and timelier.
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Here are the two advisors I run into a lot:
