Portfolio Manager Perspectives

Jeff Benjamin

Bond fund to pour $100M into post-Sandy rebuild

Community Capital Management expects solid returns as ravaged Northeast communities return

Dec 3, 2012 @ 3:35 pm

By Jeff Benjamin

Impact-investing firm Community Capital Management Inc. is homing in on the storm-ravaged Northeast as its latest effort to leverage investor capital for the benefit of specific communities.

The $1.8 billion fixed-income shop on Monday announced that it has committed to investing at least $100 million over the next 18 months in projects and programs that will directly benefit areas damaged by Hurricane Sandy.

Barbara VanScoy, co-founder of Community Capital Management and manager of the CRA Qualified Investment Fund Ticker:(CRAIX), said the investments will focus primarily on areas that promote rebuilding and construction.

Specifically, she expects to invest in taxable municipal bonds that finance redevelopment projects, multifamily mortgage-backed securities, guaranteed small-business loans and various types of single-family-housing initiatives.

Ms. VanScoy said the commitment to support the rebuilding efforts following the October storm is twofold.

“We've had a lot of clients affected because we have a strong presence in the Northeast, and we did something similar to this [in 2005] after Hurricane Katrina,” she said. “It's part of our strategy to help communities in need.”

The fund's strategy is designed around the Community Reinvestment Act, which is part of the Housing and Community Development Act of 1977 promoting community reinvestment by banking institutions.

The fund was originally created for banks, but two new share classes were created in 2007 to make it available to institutions Ticker:(CRANX) and retail investors Ticker:(CRATX).

Despite the specific mandate and deadline to invest $100 million in Sandy-related rebuilding projects, Ms. VanScoy said she does not anticipate a problem and that the fund's performance will not suffer as a result.

“With the breadth of this market, I don't think it will be difficult at all,” she said. “I think it's something we will be able to accomplish fairly quickly, and we're not going to be sacrificing financial returns or credit quality.”

CRA, which is categorized by Morningstar Inc. as intermediate-term-bond fund, is required by prospectus to be at least 75% allocated to assets that are at least triple-A-rated. And it is prohibited from investing in any bond with a rating of less than single A at the time of purchase.

So far this year, the fund has gained 4.1%, which compares with a 4.4% gain by the Barclays U.S. Aggregate Bond Index.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. Please visit InvestmentNews.com/pmperspectives for more columns.

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