PHILADELPHIA – A group of as many as 10 credit unions is planning to revive a once-abandoned initiative to create a publicly traded mutual fund by pooling member business loans originated by credit unions.
The fund would free up additional credit union funds for more MBLs by credit unions bumping up against the current MBL limit, and would provide credit unions investing in the fund with another good source of income, according to Guy Messick, a Philadelphia attorney who is helping to develop the mutual fund as a CU Service Organization. “We’ve run it by securities firms and they all think it’s a good idea,” Messick told Credit Union Journal yesterday.
The concept was tried as a pilot program before when CUNA Mutual Group launched its own CU Systems Fund in 2005, one of what was planned to be a series of publicly traded funds consisting of credit union assets. But CUNA Mutual abandoned the project soon after the departure of its CEO and the onset of a new regime. The latest project is being managed by David Dunne, who helped develop the CUNA Mutual fund.
Under the new plan, credit unions that have been certified as sellers would sell their loans to the fund, which would be sold to institutional investors, including other credit unions. The fund would be managed by Wall Street professionals and have daily valuations, according to Messick. The plan is far enough along that Bank of New York Mellon is seen as the advisor for the fund, tentatively called United Funds.
The plan still needs approval by NCUA, which must approve the fund as a permissible investment for natural person credit unions, and as a legally permissible activity for a CUSO.
