Bonds are essential to any investment portfolio, providing income and diversification. In particular, many retirees turn to interest from bonds to finance their retirement spending without liquidating their portfolios. But unfortunately, many bond funds hold U.S. Treasury bonds or those issued by large corporations – not those making a positive impact.
The CCM Community Impact Bond Fund (CRATX) is an investment-grade, intermediate-duration bond fund that seeks to preserve capital and deliver attractive risk-adjusted returns. Unlike ESG-focused funds, CRATX supports low- and moderate-income borrowers and finances affordable rental housing units, making a positive impact.
What You're Buying
The CCM Community Impact Bond Fund (CRATX) invests primarily in bonds issued by a federal government department or government-sponsored enterprises, like Freddie Mac or Fannie Mae. In particular, the fund holds more than half its assets in mortgage-backed and commercial mortgage-backed securities (MBS / CMBS).
For instance, one of the company's agency CMBS holdings supports Clairvaux Commons, an affordable housing property for seniors and people with disabilities in Indiana, Pennsylvania. The 85 residential units receive Section 8 assistance, and each apartment has an emergency medical alert system.
In addition to agency debt supporting affordable housing, the fund has a roughly 15% allocation to corporate bonds and an 11% allocation to taxable municipal bonds. These holdings help finance things like transit-oriented development, environmental sustainability, enterprise development, and job creation.
How It Fits in a Portfolio
The CCM Community Impact Bond Fund (CRATX) is an intermediate-core fund – a type of fund that serves as the ballast in a portfolio. With monthly distributions and nearly 2,000 holdings, the fund offers a combination of diversification and regular income for retirees. It also has an intermediate 5.5-year duration, lessening interest rate risk.
The fund issuer has been around since 1998 and is a pioneer in impact and ESG investing, with more than $4 billion in assets under management. And with $3.2 billion in assets, CRATX is the company's most significant impact fund, with an extensive track record of success. As a result, it's a fund that investors can trust from an impact and financial standpoint.
The fund has a $2,500 minimum investment and charges a modest 0.8% expense ratio, making it a reasonably affordable option in the impact space. When comparing impact funds, it's important to keep in mind that expense ratios tend to be higher than standard or even ESG funds given the extra effort of finding qualified bonds and reporting on impact.
The Bottom Line
The CCM Community Impact Bond Fund (CRATX) is an excellent drop-in replacement for any intermediate core bond allocation. With its robust impact reporting and focus on bonds qualifying under the Community Reinvestment Act of 1977, shareholders in the fund can rest assured that their dollars are funding worthwhile causes.