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Doing Well by Doing Good

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It’s not often that an advisor can provide clients with high current income from high-quality securities and at the same time have a chance do something good for the community, but that’s the focus of the $629 million CRA Qualified Investment Fund (CRAIX). This unusual no-load fund invests primarily in government-guaranteed or government sponsored securities that provide affordable mortgages, affordable housing, and community services for low- to moderate-income individuals; small business investment programs; and support for economic development, including permanent job creation and community revitalization.

Barbara VanScoy, portfolio manager for the fund and managing director of CRAFund Advisors, Inc., based in Westin, Florida, says the fund is designed to “create and stimulate economic development. It’s the only open-end fixed-income fund devoted solely to community development.” Originally created in 1999 to help banks and thrift institutions invest in the communities where they operate, the fund’s investment objective is to preserve capital while providing high current income by investing in securities “qualified” under the Community Reinvestment Act of 1977 []. The Act requires regulators to “encourage” banks and thrifts to lend within their local communities, including to individuals in low- to moderate-income areas.

The fund has “invested $1.3 billion in major metropolitan areas and all 50 states, Washington DC, Puerto Rico and the U.S. Virgin Islands,” according to VanScoy. The portfolio includes U.S. Treasury securities, U.S. Government-backed Government National Mortgage Association (GNMA) and Federal Housing Administration (FHA) mortgage-backed securities; Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage (Freddie Mac) mortgage-backed securities, and taxable and tax-free municipal securities with an average rating of AAA.

Now, access to the fund is easier than before, since Fidelity FundsNetwork has joined Charles Schwab, NISC (TD Waterhouse), and LPL Financial in offering the fund with a $2,500 minimum initial investment, and FolioFN with no investment minimum.