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How Much Communication Should You Expect From A Joint Venture Planning Team?
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Joint venture planning teams should communicate frequently with investors.
Financial laws in the UK require a certain degree of transparency with all investments. With JVP land investing, on-going communications is essential.
The best investment understood by smart investors. In contrast, financial turbulence and numerous cases of fraud in recent years has sent many investors back to study prospectuses with their financial advisors, eager to minimize risks and to manage their expectations. This is even more so the case, as financiers are drawn increasingly to alternative investments, such as land, precious metals, minerals and hedge funds. Alternative Investment Funds (AIFs) are market-traded securities of smaller-capitalisation firms, also an option for investors who reject the poor performance of traditional stocks and bonds.
Of course, it helps if a fund management firm is both in compliance with the law and oriented toward servicing investor information needs. A consultation paper (CP12/32, “Implementation of the Alternative Investment Fund Managers Directive”) – compiled by Financial Services Authority in 2012 – makes non-binding recommendations that apply to AIFs but could and should also be used to evaluate the likes of joint venture planning.
In other words, the general directive is to provide clear and periodic communication to investors and regulators on the status of investments.
The matter of communications is frequently described in financial circles as a matter of transparency. FSA says that investors should expect ample information in three moments of the investment:
Investors should be informed before they invest.
Investors should be informed on a periodic basis
Investors should be informed when significant changes occur relative to the investment.
The types of information that should be disclosed in advance of the investment (pre-sale disclosures) are far ranging. That includes a full disclosure of the investment strategy, as well as restrictions to the strategy. The use of leverage in the investment should be well documented and conveyed. The investment should have fully-detailed liquidity risk management arrangements. All fees and charges should be disclosed. Valuation procedures, net asset value, procedures for the issue and sale of shares and third-party service provider arrangements all need to be shared.
On an on going basis, disclosure requirements include an annual reporting, as well as notifications when liquidity arrangements are permitted. Remunerations to staff – broken down by fixed and variable remunerations, as well as senior management and staff – should be provided as well.
Joint venture plan teams for land investments have every incentive to provide frequent updates, given the two to five year life cycle typical of such investments. A well-managed plan run by experts in land acquisition will frequently have milestones to report, including those relating to site planning, commercial development, risk analysis, negotiations and planning applications.
Individuals who invest in joint ventures should do so with counsel from a personal financial advisor. Expectations for asset growth, risk tolerance and timing each factor into a decision to participate in such investments.
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