While the category of liquid alternative mutual funds has exploded in recent years—Morningstar Inc. now counts 438 such funds—the asset class has largely ignored sustainable and responsible investing (SRI) and impact investing. An exception is the no-load CCM Alternative Income Fund (CCMNX), which celebrated its one-year anniversary on May 31 and had net returns of 5.53% from inception through April 30.
The fund is the child of Community Capital Management Inc. (CCM), a Weston, Fla.-based RIA and institutional fixed-income manager with nearly $2 billion of assets under management. The product’s objective is to generate income, preserve capital and reduce correlation to stocks and bonds by employing a multi-strategy hedging approach that includes long/short equity, long/short credit and global tactical asset allocation, as well as event-driven strategies such as special situations and merger arbitrage.
A significant portion of the fund’s fixed-income holdings provide financing to projects related to affordable housing, economic and community development and renewable energy. Its long equity holdings are examined for environmental, social and corporate governance (ESG) factors via CCM’s internal research and data from Sustainalytics and Bloomberg’s ESG database.
“To our knowledge, we are the first publicly traded liquid alternative that’s even familiar with the vocabulary,” says David Sand, CCM’s chief investment strategist, referring to the fund’s ESG and impact focus.
CCM also manages separate accounts and the CRA Qualified Investment Fund (retail shares are CRATX), a $1.5 billion mutual fund that invests in high-quality fixed-income securities that support community development initiatives including affordable housing, job creation and small business development.
The CCM Alternative Income Fund’s recent 30-day SEC yield was 3.79%, and its net expense ratio of 1.60% is in line with the multialternative category’s average as tracked by Morningstar. As of March 31, the fund was 67.6% long and 37.4% short in equity, 42.1% long and 38.6% short in fixed income and 3.0% long in preferred stock. The fund’s equity sleeve is managed by subadvisor Badge Investment Partners LLC.
In keeping with the fund’s low-volatility/low-correlation objective, its beta, or volatility versus the S&P 500 and Barclays Aggregate, was -0.01 and -0.09, respectively (monthly since inception through March 31). A beta of less than 1 indicates less volatility than the market.
The fund’s correlation, or lack thereof, to the S&P 500 and Barclays Aggregate Bond Index during that period was -0.06 and -0.13, respectively. Perfect negative correlation is -1, while perfect correlation is +1.
According to CCM, the fund is currently offered on the platforms of Charles Schwab, Envestnet, FOLIOfn, Mesirow, NFS/Fidelity, Pershing, Pershing Advisor Solutions, Raymond James and TD Ameritrade, with a 401(k) option available on some of these. The fund’s minimum initial investment of $100,000 is typically being waived as it builds assets.
Kevin O’Keefe, chief investment officer of First Affirmative Financial Network LLC, a Colorado Springs, Colo.-based independent RIA with nearly $900 million under management for socially conscious investors, views the CCM Alternative Income Fund as a welcome addition. “The fund isn’t all SRI, but it has elements of awareness,” he says. “In the world of liquid alts, there is nothing else that’s SRI-aware, so we’re happy to include it in that block.”
“It helps dampen portfolio volatility,” O’Keefe adds, and “when investors experience a smoother ride, they’re more likely to stay with the strategy.”