WASHINGTON - After tempering overly optimistic projections, the CRA Qualified Investment Fund designed to help banks comply with the Community Reinvestment Act is starting to post good numbers.
The organizers of the fund said when it was established in 1999 that it would reach $1 billion within a year, then quickly lowered the forecast to $100 million.
But they announced this week that more than 100 financial companies had invested in the Fort Lauderdale, Fla.-based fund and that its assets had surpassed the $200 million mark.
Perhaps more interesting than the fund managers' ability to persuade banks to participate in the fund is that nonbanks, which do not need CRA credit, have invested in it.
One of the Community Reinvestment Act's three principal requirements is that banks with assets topping $250 million invest in activities in their geographic areas that meet the credit and capital needs of low- and moderate-income families. But there are too few profitable projects to invest in, many bankers complain.
Investors in the Fort Lauderdale fund include Washington Mutual Bank, Wells Fargo Bank, and Citigroup Inc. along with the California Community Foundation; SBLI Mutual Life Insurance Co. and other insurance companies; foundations; charities; and faith-based organizations.
"The fund and our advisers provide a unique opportunity for investors to take advantage of an investment that mirrors the performance and credit quality standards in their fixed-income portfolios but allows them to make a direct, positive impact in their communities," said Todd J. Cohen, the fund's portfolio manager.
The fund holds AAA-rated securities that yield roughly 8% a year. An investing company owns a pro rata share of the fund, and its investment is matched dollar for dollar with investments in its CRA assessment area.
The fund has bankrolled some innovative projects.
In March it bought an entire $10 million bond initiative by the Texas Department of Housing and Community Affairs. The revenue was earmarked to provide mortgage loan assistance and housing for those earning 0-30% of the area median family income; for low-income individuals such as the elderly; persons with disabilities or AIDS; so-called colonia residents (mostly Mexican-Americans living in shantytowns along the Mexico-Texas border); and the homeless.
By going through the fund, 10 banks that individually could not have bought the bonds were able to participate in the Texas initiative, said Byron Johnson, the department's director of bond finance.
"It's been a very good experience," he said. "We're planning to go back to them with another deal."
Bankers have been pleased with the results as well.
Myron Perryman, manager of community investment at Washington Mutual Bank, said, "Strategically, it gave us an opportunity to invest in something that allows us to target our capital at CRA markets we may have difficulty reaching. It's good business." He noted that the fund's manager, CRAFund Advisors (also of Fort Lauderdale), ensures that all investments are CRA-eligible.
In addition to getting CRA credit, Wamu and other investors make a profit, Mr. Perryman said.
"It earns us income immediately," he said. More typical CRA investments tend to tie up the thrift's capital in projects that yield earnings three to five years down the road, he said.
At midyear more than 30 banks had received credit under the investment test component of the CRA exam by joining the CRA Qualified Investment Fund, according to CRAFund Advisors.
