Question: Member Percentage Limit
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I am wondering if other clubs (in their constitution/charter) have a limit on the percentage a single member can have in the club (e.g. 20%, 25%, 49%, etc…)? What is that limit and why was it chosen? If the member hits or exceeds that limit, what is the response?
Thanks, Jason Brand
In our club a partner may not purchase units that make them own more than 25%. If it goes over because others leave we do not do anything. On Thu, Apr 28, 2016 at 7:12 AM, Jason Brand <jbrand@grrp.com> wrote:
In our club we decided to have a ceiling percentage, but one which would stay reasonable whether the club got big or small. For example, if we had a flat 25% percentage it would start to get *very* egalitarian if the club got down to 6 or fewer members. So we made a formula which works for small sizes as well as big. Something like 2X the position size it would be if everybody was equal. Hope this helps. -- Mark Johnson, XYZ Investment Club, Houston TX On Thu, Apr 28, 2016 at 7:36 AM, Scott Freeman <scottbefreeman@gmail.com> wrote:
Both of my clubs have 20% limits, but neither of them base their voting power on the percentage a member owns of the portfolio. If a member bumps up against the upper limit, he/she stops contributing until their position falls back under the limit. Though, I'm not sure why it really makes that much of a difference. One puts their faith in the advantage of the collective decision-making process that only exists in an investment club. If one believes they should have greater voting rights based on their larger portion of the invested pie, then they should just reduce their position in the club and invest more on their own. Often, I feel members get too wrapped up in the money and not enough in the educational aspect of being in an investment club. The group think and opinion sharing is invaluable. In my humble opinion, I've always felt that by being a member of an investment club, you willingly give up your percentage based voting rights in exchange for the unique "group" advantage. If a member doesn't understand this, then they are in the investment club for the wrong reason. Stu WeissmanOn Thu, Apr 28, 2016 at 8:57 AM, Mark Johnson <mr.johnson.1953@gmail.com> wrote:
Very nicely put, Stu! Bob Hays Sent from myMail for iOS Thursday, April 28, 2016, 6:22 AM -0700 from stuart.weissman@gmail.com <stuart.weissman@gmail.com>:
Investment clubs should copy Stu's message below and share it with all their members. Anyone belonging for another reason is probably not an asset to the group. Mike Jones Wall$treet Wannabees Bloomington, MN From: Stuart Weissman <stuart.weissman@gmail.com> To: "club_cafe@bivio.com" <club_cafe@bivio.com> Sent: Thursday, April 28, 2016 8:22 AM Subject: Re: [club_cafe] Question: Member Percentage Limit Both of my clubs have 20% limits, but neither of them base their voting power on the percentage a member owns of the portfolio. If a member bumps up against the upper limit, he/she stops contributing until their position falls back under the limit. Though, I'm not sure why it really makes that much of a difference. One puts their faith in the advantage of the collective decision-making process that only exists in an investment club. If one believes they should have greater voting rights based on their larger portion of the invested pie, then they should just reduce their position in the club and invest more on their own. Often, I feel members get too wrapped up in the money and not enough in the educational aspect of being in an investment club. The group think and opinion sharing is invaluable. In my humble opinion, I've always felt that by being a member of an investment club, you willingly give up your percentage based voting rights in exchange for the unique "group" advantage. If a member doesn't understand this, then they are in the investment club for the wrong reason. Stu WeissmanOn Thu, Apr 28, 2016 at 8:57 AM, Mark Johnson <mr.johnson.1953@gmail.com> wrote:
As a member of a club that has been in existence since 1988, we have a limit on voting percentage. Percentage of ownership was originally set at 20%, but one member breached this percentage so we did not limit ownership but did limit voting percentage so that no member could dominate. As a club we normally vote one member one vote, however any member can request a percentage vote which would override the one member one vote. This is done as a protection for the members who have been in the club longer and have more to lose in case you have a higher number of newer or inexperienced investors who tend to want to get rich quickly with riskier investments. We have 43 members. We're in the process of reviewing our Partnership Agreement and are questioning the reason for limiting a partner to 20% or 25% ownership. If our agreement states that each member gets 1 vote on issues the club is considering, regardless of their ownership percentage, what difference does it make if a member has a greater percentage ownership. We're considering removing that requirement but thought we'd question the reason for this limitation before we amend our Partnership Agreement. What point are we missing? Dick - I can only assume that the major reason is the impact a larger percentage participation would have on the rest of the members in the event you decide to withdraw from the club. Remember, that to payout a member requires selling the holdings and may impact the remaining club members. Bivio may be able to provide additional reasons. Ray On Saturday, May 28, 2016 1:06 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: We're in the process of reviewing our Partnership Agreement and are questioning the reason for limiting a partner to 20% or 25% ownership. If our agreement states that each member gets 1 vote on issues the club is considering, regardless of their ownership percentage, what difference does it make if a member has a greater percentage ownership. We're considering removing that requirement but thought we'd question the reason for this limitation before we amend our Partnership Agreement. What point are we missing? A large point is the impact to the portfolio if the person departs. We just had a person leave with 14%. Causes disruption. Is also a significant opportunity to winnow losers from the portfolio. To me its a similar issue whether stock percentage of the portfolio, or individual percentage, risk and disruption. Be Well. Irina Sent from my iPad > On May 28, 2016, at 2:06 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: > > We're in the process of reviewing our Partnership Agreement > and are questioning the reason for limiting a partner to 20% > or 25% ownership. If our agreement states that each member > gets 1 vote on issues the club is considering, regardless of > their ownership percentage, what difference does it make if > a member has a greater percentage ownership. We're > considering removing that requirement but thought we'd > question the reason for this limitation before we amend our > Partnership Agreement. What point are we missing? Irena - I agree. Ray On Saturday, May 28, 2016 1:22 PM, Irina Clements <irina39@verizon.net> wrote: A large point is the impact to the portfolio if the person departs. We just had a person leave with 14%. Causes disruption. Is also a significant opportunity to winnow losers from the portfolio. To me its a similar issue whether stock percentage of the portfolio, or individual percentage, risk and disruption. Be Well. Irina Sent from my iPad > On May 28, 2016, at 2:06 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: > > We're in the process of reviewing our Partnership Agreement > and are questioning the reason for limiting a partner to 20% > or 25% ownership. If our agreement states that each member > gets 1 vote on issues the club is considering, regardless of > their ownership percentage, what difference does it make if > a member has a greater percentage ownership. We're > considering removing that requirement but thought we'd > question the reason for this limitation before we amend our > Partnership Agreement. What point are we missing? Thank you both for your input. What you say makes sense. Now I
understand the reason for this limitation.
Dick
From: fipsrus@att.net
Sent: Saturday, May 28, 2016 2:25 PM
Subject: Re: [club_cafe] Re: Question: Member Percentage
Limit Irena - I agree.
Ray
On Saturday, May 28, 2016 1:22 PM, Irina
Clements <irina39@verizon.net> wrote: A large point is the impact to the portfolio if the
person departs. We just had a person leave with 14%. Causes
disruption. Is also a significant opportunity to winnow losers from the
portfolio. To me its a similar issue whether stock percentage of the
portfolio, or individual percentage, risk and disruption. Be Well. Irina Sent from my iPad > On May 28, 2016, at 2:06 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: > > We're in the process of reviewing our Partnership Agreement > and are questioning the reason for limiting a partner to 20% > or 25% ownership. If our agreement states that each member > gets 1 vote on issues the club is considering, regardless of > their ownership percentage, what difference does it make if > a member has a greater percentage ownership. We're > considering removing that requirement but thought we'd > question the reason for this limitation before we amend our > Partnership Agreement. What point are we missing? Anytime...we are all in a learning process (well I am!). Ray On Saturday, May 28, 2016 1:44 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: Thank you both for your input. What you say makes sense. Now I
understand the reason for this limitation.
Dick
From: fipsrus@att.net
Sent: Saturday, May 28, 2016 2:25 PM
Subject: Re: [club_cafe] Re: Question: Member Percentage
Limit Irena - I agree.
Ray
On Saturday, May 28, 2016 1:22 PM, Irina
Clements <irina39@verizon.net> wrote: A large point is the impact to the portfolio if the
person departs. We just had a person leave with 14%. Causes
disruption. Is also a significant opportunity to winnow losers from the
portfolio. To me its a similar issue whether stock percentage of the
portfolio, or individual percentage, risk and disruption. Be Well. Irina Sent from my iPad > On May 28, 2016, at 2:06 PM, Dick Lewis <rlewis21@nc.rr.com> wrote: > > We're in the process of reviewing our Partnership Agreement > and are questioning the reason for limiting a partner to 20% > or 25% ownership. If our agreement states that each member > gets 1 vote on issues the club is considering, regardless of > their ownership percentage, what difference does it make if > a member has a greater percentage ownership. We're > considering removing that requirement but thought we'd > question the reason for this limitation before we amend our > Partnership Agreement. What point are we missing? But tale a look at the flip side--I am a charter member--the only one left--and what am I supposed to do? I have made the same contributions as have the rest but I have 16 years of contributions with the next closest with 7. I realize that I have a large majority--but how were we to prevent it? From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Dick Lewis Thank you both for your input. What you say makes sense. Now I understand the reason for this limitation.
Dick
From: fipsrus@att.net Sent: Saturday, May 28, 2016 2:25 PM Subject: Re: [club_cafe] Re: Question: Member Percentage Limit
Irena - I agree. Ray On Saturday, May 28, 2016 1:22 PM, Irina Clements <irina39@verizon.net> wrote: A large point is the impact to the portfolio if the person departs. We just had a person leave with 14%. Causes disruption. Is also a significant opportunity to winnow losers from the portfolio. To me its a similar issue whether stock percentage of the portfolio, or individual percentage, risk and disruption.
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