Joining an investment club: how it works, requirements and steps

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Joining an investment club appeals to individuals who want to invest without going it alone. The principle: several investors pool their savings, share their knowledge and make decisions together. Behind this term, however, lie very different realities, from the stock market club among friends to private clubs that give access to deals in startups.

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What is an investment club?

Definition and history

An investment club is a group of individuals who build and manage a portfolio of securities together. Each member regularly contributes a sum and holds a share of the portfolio proportional to their contributions. Popularized in the United States in the middle of the 20th century, the model spread to France and many other countries. French clubs are today federated by the F2IC (Fédération des Investisseurs Individuels et des Clubs d'investissement, the French federation of individual investors and investment clubs).

The different types of clubs

• The stock market club, held in joint ownership, invested in listed shares. This is the historical model.
• Solidarity clubs, such as the CIGALES, which support local businesses with an impact focus.
• Business angel networks, which finance startups in their early days and support their founders.
• Private investor clubs and club deals, run by a company or a platform, to invest directly in unlisted assets together in high-potential companies or real estate.

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How does an investment club work?

The principle: the joint ownership agreement

The stock market club is neither an association nor a company. It rests on a joint ownership agreement (convention d'indivision) signed by all members, which sets contributions, voting procedures and the conditions for joining and leaving. No registration is required, which makes it simple and inexpensive to set up.

Requirements: members, duration and contributions

• between 5 and 20 members, with dissolution below the threshold of 5;
• a duration of 10 years maximum;
• only one club per person, with spouses allowed to belong to different clubs;
• contributions capped at 5,500 euros per year per tax household.

Organization: board, meetings and voting

The board consists of a president, who represents the club, a treasurer, who keeps the accounts and monitors the portfolio, and a secretary, who writes the minutes. Members meet, often once a month, to analyze stocks and vote on buy or sell decisions. The club opens a securities account in its name with a bank or broker, which executes the transactions.

Taxation: transparency

Each member declares their share of the dividends received by the club. Net gains from stock market transactions are exempt from income tax if contributions respect the cap of 5,500 euros per year per tax household. Social contributions remain due.

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Advantages and risks of joining a club

The advantages

The reasons for joining a club are first and foremost educational: you learn to analyze a company and build a strategy through exchanges with people of varied skills, each bringing the expertise of their own sector. Pooling resources also makes it possible to diversify your portfolio more effectively and to share costs. Finally, the club gives access to a community and a network: in private clubs, this network effect opens up opportunities and an ecosystem of entrepreneurs closed to the general public. Group dynamics help you stay the course over time.

The risks

• Capital loss: no return is guaranteed.
• Slow collective decisions in the face of a moving market.
• A time commitment: meetings, analysis, a role on the board.
• Disagreements between members with diverging objectives.
• Capped amounts in the stock market club.
• For private clubs: membership fees, deal selection to be checked, capital that is illiquid for several years.

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The steps to joining an investment club

Finding and choosing your club

The F2IC's teammate exchange (bourse des équipiers) connects candidates with clubs that are recruiting. Business angel networks, the CIGALES and online private clubs are other avenues. Before applying, check the club's objectives and strategy (types of assets, horizon), the experience of its members, the transparency of how it operates, its fees and its track record: its successes as well as its failures, and how decisions are made. A club that publishes regular reporting and accessible minutes offers more guarantees. For a private club, also check the AMF approval or ORIAS registration of the company that runs it.

Joining and first steps

Most clubs ask for an application or an interview to validate the candidate's profile and motivation. Some private clubs operate by co-optation. Once accepted, the member signs the agreement or the membership contract, makes a first contribution and takes part in meetings and votes. In a private club, they get access to investment files and choose, deal by deal, the projects they wish to support.

Creating your own club

All it takes is gathering at least five people, drafting the agreement, electing the board and opening a securities account in the club's name. The F2IC provides templates to make this setup easier.

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Investor clubs, club deals and private equity: what alternatives?

Club deal and business angel

A club deal brings together several investors around a single transaction, for example the acquisition of a company on the leveraged buyout model, without a shared portfolio managed over time. Our article on co-investment details this mechanism. Those who want to support entrepreneurs can also become a business angel, an approach that venture capital applies on a larger scale.

Accessing private equity without managing a club, with Fundora

Fundora lets you benefit from the pooling of a club without taking on its management or the selection of deals. Fundora identifies and offers private equity strategies from the global top 25% of funds, with actual management carried out by Kyoseil Asset Management under the mandate, a portfolio management company approved by the AMF. The subscriptions of several individuals are pooled in an FPCI coupled with an SPV, which invests in selected target investment funds. The entry threshold is significantly lower than for a direct subscription, with the minimum amount varying according to the strategy open for subscription. The strategies cover several countries, including the United States, and several segments, up to secondary private equity. Find out how to invest in private equity or invest in startups with Fundora. These investments carry a risk of capital loss and a lock-up period of several years.

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FAQ

Who can join an investment club?

Any adult individual, provided they are a member of only one club. A minor can take part with their parents' consent. Private clubs set their own membership conditions.

How much do you have to pay in?

A regular sum set by the agreement, within the limit of 5,500 euros per year per tax household for the clubs' tax regime. In a private club, the amount depends on the deals chosen.

How do you find an investment club?

Through the F2IC's teammate exchange, regional business angel networks, the CIGALES or online investor communities.

What is the difference with an investment fund?

In a club, the members manage the portfolio themselves. In a fund, management is entrusted to an approved management company, without the investor taking part in decisions.

Can you leave an investment club?

Yes, according to the terms of the agreement. The member recovers their share of the portfolio. If the contribution cap was respected, the capital gains withdrawn are exempt from income tax, excluding social contributions.

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