Community Capital Management, based in Weston, Fla., has been investing in the bonds of low- and moderate-income communities for two decades. It oversees $3.5 billion, with $3 billion of it in the
CCM Community Impact Bond
fund. The bonds and loans that it buys help banks meet the Community Reinvestment Act.
So far this year, the CCM fund (ticker: CRATX) is down 0.6% in a tough bond market, beating both
intermediate government fund category as well as its benchmark, the Bloomberg Barclays U.S. Government Index. We checked in with David Sand, Community Capital’s chief impact officer, on the first anniversary of George Floyd’s death in police custody, which catalyzed a wave of protests over police brutality and racial inequality. Keep reading for an edited version of the conversation.
Barron’s: It’s been one year since George Floyd died. What’s changed in how you do business?
David Sand: Our business is about investing in underserved communities and underserved people. For 20 years, our money has funded people at the lower end of the income ladder, and those people are disproportionately minorities. We have geographic data, census data, a lot of data. What has changed is the willingness of counterparties to give us race, gender, and ethnicity data [to allow Community Capital to focus its lending].
Before George Floyd’s death, we invested in mortgage-backed securities going to minority and women home-buyers. People wanted something new to express their concerns. We launched our Minority Cares strategy on Juneteenth of 2020 [a holiday marked on June 19 to commemorate the emancipation of enslaved people in the U.S.].
What is the Minority Cares strategy?
We have 18 impact themes at Community Capital. We found that in eight of them, the highest preponderance of capital goes to minority communities, businesses, and people of color. There are now $500 million in assets deployed in the strategy. We have more than 40 clients directing money toward the initiative. We report the investments we make, including how many loans are made to minority borrowers, to women borrowers, to racial and ethnic areas of poverty, including Asian-Americans. The goal is to have $2 billion in the strategy in five years.
What’s a typical investment?
We invested in a custom-created affordable mortgage pool to low- and moderate-income Black borrowers. It included 16 loans across nine different states. Seven of the loans are to Black women borrowers. Three are in high-poverty census tracts, 10 are in predominantly minority census tracts. We invested in an agency commercial mortgage-backed security financing a low-income housing tax credit property where 75% of the population are minorities and 21% live below the poverty line. We also invested in a corporate bond issued by Howard University. Historically Black colleges and universities are having a moment of recognition that is long overdue.
Community Capital recently issued a report about the Black homeownership gap in the U.S. What did you find?
There’s a chasm between black and white homeownership rates even when you hold constant for income, credit scores, and education. It is stubborn. It is affecting families and communities generation after generation. In the past year, based on all the statistics we’re seeing, the gap has gotten worse. The people most damaged for health and economics during Covid-19 were minority communities. We’re pretty sure when the statistics come out that the homeownership rate will have decreased in 2021 rather than increased. It makes it more important that there are solutions and capital [to mitigate it]. We are an agent for that.
Inflation is rising. How are you positioning your fund?
We have to take [Federal Reserve Chairman Jerome] Powell at his word that he wants to see inflation above 2% for a sustained period before he believes the deflationary pressures in the global economy pre-Covid have been addressed. I’m old enough to remember hyperinflation in the ‘70s. It was a form of taxation on low- to moderate-income people, very pernicious. We’re a very, very long way from that ladder to hyperinflation.
We are keeping duration on the short side vis-à-vis our benchmark. We’re still very positive about our product universe.
What does the supply of potential investments look like?
It varies by sector. Single-family mortgages are very sensitive to interest rates, but a lot of the world we’re working in is first-time home buyers coming out of rental, and it will be attractive and worthwhile for them. The big thing is what happens to the economy. Jobs are returning and, it’s reasonable to surmise from a macro U.S. GDP point of view, we’re out of the pandemic.
Supply of taxable municipals was very strong toward the end of 2020 and continues this year. There may be an entirely new category [of investment] if the infrastructure bill includes a recognition of human-capital infrastructure, such as the care economy—child care, daycare, home healthcare, and community health centers. All are part of civic and community infrastructure. People realized during Covid that it was so important, that it’s part of our national security.
Write to Leslie P. Norton at [email protected]