With its latest commitment, of $6 million, BankUnited Financial Corp. of Coral Gables, Fla., has become the largest single investor in a mutual fund that helps support community development initiatives.
The $13.6 billion-asset BankUnited has now invested $23 million in the eight-year-old CRA Qualified Investment Fund, which is managed by CRAFund Advisors of Weston, Fla.
CRAFund Advisors started the fund with just a handful of investing banks and $3.7 million of assets under management. It now has more than $721 million under management and counts 310 banks as investors.
The fund has returned 5.3% a year, and because it acquires bonds that finance CRA-qualified activities, such as job creation or affordable-housing programs, banks earn Community Reinvestment Act credit for investing in it.
"It's a real win-win," said Ramiro Ortiz, BankUnited's president and chief operating officer. "For us it's an efficient way of investing in the communities that we serve, and the fund continues to grow."
The fund buys and holds bonds issued to support CRA-qualified activities from entities such as Ginnie Mae, the Florida Housing Finance Corp., and local municipalities.
It also enables banks to direct their investments to specific communities. Banks identify communities they would like to support, and the fund managers purchase CRA-qualifying bonds in those communities on their behalf.
The fund's investors include such large national banking companies as the $91 billion-asset PNC Financial Services Group Inc. in Pittsburgh and such community banks as the $878 million-asset Peoples Bank and Trust Co. in Selma, Ala.
BankUnited's investments in the CRA fund have gone to support such organizations as Florida's Hurricane Housing Recovery Plan, which helps Floridians affected by 2004's Hurricane Charley obtain mortgages. Its investments also support the Small Business Administration's guaranteed loan program.
"As we continue to increase our footprint, we continue to suggest to them market areas, counties, specific efforts and so forth that we think would be beneficial to the particular community that we want to invest in, and they find the vehicles to do that," Mr. Ortiz said.
"The benefit to us is not just on the front end," said Humberto L. Lopez, BankUnited's chief operating officer. "They continue to monitor the investments as we go forward, so that takes the burden off of our portfolio manager to focus on other things."
Alyssa D. Greenspan, a director at CRAFund Advisors, said that approximately 60% of the fund's growth has come from banks that have increased their investments. It has attracted "repeat customers," she said, in large part because it takes a regulatory load off of banks' back-office employees.
Fund managers provide all the paperwork banks need to document their CRA efforts to regulators, Ms. Greenspan said.
"It gives all the specifics on the investments we're making on their behalf, the community development impact," and why it is a CRA-qualified investment, she said. "I think it's just easier for banks to come back and increase their investment in the fund as they grow and merge with other banks."
