Socially responsible investing is accelerating at a respectable clip, but it is still a tricky sell.
A growing number of investors want their portfolios to reflect their values, but they also want these products to make money. They also want to be able to direct their funds to the specific issues that are near and dear to the hearts. While the selection of '40 Act products is indeed growing
, there are still areas of need that have yet to be addressed.
is trying to tap into frustrated demand of investor by ramping up its sales of a product that allows investors, at least in part, to decide where their money is allocated.
The product, named the Access Capital Community Investment Fund
, is a '40 Act mutual fund that invests in "geographically specific debt securities located in portions of the United States designated by Fund investors."
RBC's head of distribution Matthew Appelstein
described it as a "very unique product" that has been generating a lot of investor buzz.
"It is an impact investing product where you can have a double bottom-line. You can give back to the community and get a market rate of return. Here, you can actually put the money into the fund and direct it into the communities you want to receive investments," he recently told MFWire
The 17-year-old fund was launched by Ron Homer
, institutional portfolio manager and president of Access Capital Strategies, RBC Global Asset Management. Formerly a commercial banker with 13 years of experience (culminating in the position of chief executive officer) at Boston Bank of Commerce, Homer had launched Access Capital Strategies, and the fund, in 1997. Access was subsequently acquired by Voyageur Asset Management
, a subsidiary of the Royal Bank of Canada, in August 2008. Voyageur, of course, changed its name to RBC Global Asset Management
in January 2010.
The fund invests in a variety of debt instruments, including government-guaranteed debt like Fannie Mae and Freddie Mac securities, small business loans and various municipal securities geared at issues such as affordable housing and community development.
"We hand select every loan that goes into these customized mortgage-backed securities," Homer told MFWire
Investors can ask that their money be invested in a particular region, a particular city, a specific census track. It usually takes three to six months to get all of an investor's money fully vested in a particular destination.
The 10 year average performance for the fund is over 4% net of fees and for the strategy, over 4.25% net.
One of the keys to the success of the fund, which had AUM of $513 million at the end of 2013, is the reliability of low and medium income borrowers to pay back on their mortgage.
"Over time, a loan to a working class person who is buying a home will tend to outperform the universal mortgage product," Homer said.
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