IN IT TOGETHER
A group of young Calgary engineers used an investment-club concept to talk stocks,
CALGARY— Some see it as a throwback to another era, but a group of 20something Calgary engineers say they heartily recommend membership in an investment club after running one for three years.
A well-worn copy of a Canadian Investment Institute book called How to Start and Run an Investment Club for Fun and Learning, spotted in a secondhand bookstore four years ago, gave founder Taylor Merritt, 29, the idea to create the Hillary Club.
The $6 book sparked an online invitation to his friends to ask if they were interested.
A group of four soon started meet- ing weekly over breakfast for “stock talk” sessions.
About a year later, the decision was made to take the plunge and start investing real money. A partnership agreement was drafted and registered with provincial securities authorities. The members voted to donate 5 per cent of net income to charity.
“A lot of that first year was just feeling out everyone’s risk tolerance and their appetite for some of these different kinds of investments,” said Craig Merritt, 30, Taylor’s older brother and a founding member.
“When you mix money and friends, you have to be very careful because you could lose both,” Taylor chimed in. Two more members, also unmarried male engineers who work in downtown Calgary, joined later. The group got together once a week to pick investments but also met for non-investing activities, such as hiking in the mountains.
It’s difficult to get a handle on how many investment clubs operate in Canada. They are regulated by provincial securities authorities, but neither the Alberta Securities Commission nor the Ontario Securities Commission (OSC) keeps track of how many there are. Spokesperson Nima Ranawana said the OSC recommends that members seek legal advice while setting up such clubs because they must comply with rules regarding prospectus, dealer registration and fund manager exemptions.
Tom Graham, the ASC director of corporate finance, said his organiza- tion gets a handful of inquiries about clubs every year but they mostly operate “under the radar” — in other words, he said, there have been no complaints filed.
He said there’s a long list of prohibitions designed to ensure the clubs aren’t fronts for investment businesses. There can’t be more than 50 members, clubs can’t borrow money from non-members, no member can be paid for his or her services and there are no preferred shares — proceeds must be distributed based on the amounts contributed.
The Hillary Club was dissolved by mutual agreement at the end of the second quarter this year.
Craig Merritt said he learned a great deal about investing that he can use in his personal saving strategy going forward, but the time involved in researching investments for the club grew too onerous.