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October 02, 2002
Innovative Community Investment Fund Attracts Institutional Investors
    by William Baue

The CRA Qualified Investment Fund, originally established to help banks fulfill a federal mandate for community investment, now appeals to a broader range of institutional investors.


Congress established the Community Reinvestment Act (CRA) in 1977 to require banks with assets greater than $250 million to invest in projects that help low- and middle-income families in the banks' own geographic regions. Weston, Florida-based CRAFund Advisors established the CRA Qualified Investment Fund (ticker: CRAIX) in 1999 to fulfill this mandate through its Direct Impact Investing approach. Direct Impact Investing enables banks to invest in securities that meet CRA requirements. Since its inception, the fund has generated such attractive returns that institutional investors with no federal community investing mandate have similar investments through CRAFund Advisors.

"It's not often that you come across a money management firm that raises the bar for how to invest responsibly, but that's just what CRAFund Advisors has done," said Luther Ragin, Jr., vice president of social investing at the F.B. Heron Foundation. CRAFund Advisors manages a separate bond account similar to the fund for this $260 million charitable organization. "Now, we're earning returns in line with financial benchmarks while advancing our organization's mission."

The fund's financial performance is competitive with other fixed-income investments: as of August 31, 2002, its year-to-date return was 7.60 percent, and its one-year return was 8.25 percent. With the recent addition of Wells Fargo (WFC) as a client, the portfolio's assets broke the $200 million mark.

"As per the Morningstar website, we are in the top 5 percent for year-to-date and the top 10 percent for one-year returns compared to roughly 650 intermediate term bond funds," said Todd Cohen, president of CRAFund Advisors.

The fund's social dividends are also noteworthy.

"To date, client assets invested with CRAFund Advisors have helped fund almost 10,000 affordable rental housing units, 770 single family home loans, 550 affordable health care beds, and nearly $31 million in miscellaneous community development activities," said Mr. Cohen.

The CRA Fund can enable institutions to invest in certain securities that otherwise have a prohibitively high minimum investment. For example, 11 CRA Fund investors pooled their assets to purchase a $10 million bond issued by the Texas Department of Housing and Community Affairs (TDHCA). None of these institutions alone could have invested in this bond. Money from the TDHCA bond is being used to build housing for low-income Texas families, provide down payment assistance for rural and border-town residents, and assist disabled homeowners.

The CRA Fund is fulfilling its original mission very successfully. Of the 30 banking institutions whose CRA Fund investments have been scrutinized for meeting CRA requirements (as of June 30, 2002), all have passed the examination process.

With this combined social and financial success, CRAFund Advisors is considering opening up the CRA Fund to individual investors on the retail level.

"At this juncture, the minimum investment is $250,000 for all investors; however CRAFund Advisors is exploring the possibility of offering shares on the Schwab mutual fund platform or making a retail class of shares available," Mr. Cohen told SocialFunds.com.

 

 
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