In Your Best Interest: An ALM First Podcast
Our goal is to give you an insider's view of the latest market trends, explore common depository challenges and share success stories and insights from industry leaders. Join us to gain new perspectives as our experts dive into effective balance sheet management techniques and break down best practices. Visit our website at https://www.almfirst.com/.
In Your Best Interest: An ALM First Podcast
Empowering Change: The AACUC Future Fund and the Future of CDA's
Ready to unlock the secret to impactful charitable giving within the credit union community? Join us for an enlightening conversation with Renée Sattiewhite from the African American Credit Union Coalition (AACUC) and Jason Haley from ALM First. Together, they reveal the innovative AACUC Charitable Donation Account Fund and how it promises to revolutionize support for vital initiatives. Learn firsthand how this fund is designed to sustain impactful programs like internships and leadership development while providing a flexible and efficient avenue for credit unions to contribute to meaningful causes.
Our discussion takes a deep dive into the AACUC's Future Fund and its critical role in the growth and sustainability of small credit unions. Discover how ALM First has crafted a streamlined investment vehicle to facilitate contributions from multiple credit unions, maximizing the impact on the community. We dissect the fund's unique structure and the strategies in place to manage financial risks, ensuring a steady income stream for long-term initiatives. Hear Renée and Jason share their experiences and insights, giving you a personal connection to their mission and the greater credit union movement.
In our final segment, we spotlight the newly launched fund aimed at supporting smaller credit unions, backed by substantial investments from industry giants. Understand the process and importance of contributing to this fund, and the critical role it plays in the future of the credit union industry. We wrap up with heartfelt gratitude and optimism, celebrating the dedication and leadership of Renee and Jason in driving this groundbreaking project forward. Tune in to be inspired and informed about the transformative power of credit union charitable giving!
Welcome everyone to the 25th episode of In your Best Interest, an ALM First podcast, a show that will explore common depository challenges, give you an insider's view of the latest market trends and share stories and insights from industry leaders. I'm your host, mike Ensweiler. In an increasingly competitive financial services landscape, credit unions are differentiating themselves through their mission-driven approach, giving back to both their communities and supporting their broader credit union cooperative movement is at the core of their initiatives. Increased focus on impact is leading to the rise of charitable donation giving and donor advised funds, including the recent launch of the AACUC Charitable Donation Account Fund. The fund was founded to provide sustainable funding for the African American Credit Union Coalition, a 501 charitable organization created to increase the strength of the global credit union community. Starting about a year ago, alm First began working with the AACUC to develop an evergreen funding mechanism to support their recently announced future fund. On today's podcast, we'll discuss how AACUC and ALM First are working together to ensure the long-term strength and sustainability of the organization, regardless of industry trends, economic downturns and social political headwinds.
Speaker 1:My guests today are Renee Satty-White, the President and CEO of the AACUC, and Jason Haley, chief Investment Officer at ALM First. Welcome Renee and Jason to the podcast and thank you for joining us. Thank you for having us Awesome Thanks, mike. So, before we get started, it's always kind of fun to get to know the people that are on the other end of the microphone, so to speak. So I'd like for each of you to maybe share a fun fact about yourself that maybe a lot of people don't know. And we're going to go ladies first, renee, so I'm going to put you on the spot right out of the chute here.
Speaker 2:Thank you, Mike. I don't think everybody knows that I'm a Trekkie. I like Star Wars too, but I'm a Trekkie first. So long live and prosper.
Speaker 1:That's great.
Speaker 3:Mine is not that cool. So I'm an investment portfolio manager by trade and I have spent a lot of time doing relative value analysis and making investment decisions. And I happen to do that in my personal life as well. As some people know, my wife I've actually known since birth and she was my girlfriend in fifth grade and sixth grade. So when you see value, you jump on it as early as you possibly can before it goes away. And you know, while we were very often on through the high school years, we happen to have been on for about 22 years now, so we got that going for us. So, yeah, that's kind of weird. I guess where I grew up in Mississippi, that might be more normal.
Speaker 2:That's right, Not everywhere else 22 years and you met her in the. You said since birth, but you met her in fifth grade.
Speaker 3:Well, she was my girlfriend in fifth grade. We small town, so we were in first grade together all the way through, yeah, oh how cool is that though? Eh, maybe I say that she might not.
Speaker 2:And what's wifey's name? Polly. Say it one more time.
Speaker 3:Polly like. Polly wants a cracker. Polly wants a cracker. She's a saint. She is a saint.
Speaker 2:Polly wanted a Jason. Polly wanted a Jason.
Speaker 1:Yeah, she wanted a Jason 22 years ago, but we digress, we digress. Let's get back to the subject at the end, all right? So let's start it off and I'm going to look to you, jason. For those those who may not be familiar, what is a charitable donation account and what are the benefits of a CDA, as it were?
Speaker 3:Yeah. So my good question charitable donation accounts, or CDAs, is what we refer to it through most of the conversation. You know, to me is something that is really well aligned with the cooperative and community spirit of credit unions in general. So if you go back to the regulations, the NCUA Rule 721.3 established the ability for credit unions to build what they think how they refer to it in the regulations a hybrid charitable and investment vehicle where credit unions can fund an investment portfolio as a means to make donations to a particular qualified charity of their choosing.
Speaker 3:There are some guardrails around it. It's limited to 5% of net worth for any one institution and how much they can put into a charitable donation account. They have to donate a certain percentage of the earnings from that portfolio within a certain time frame. But other than that, the nice thing about it or a lot of institutions take advantage of is not only their ability to engage in that community giving and that spirit. They're able to do investments outside of what they could do in their normal investment portfolio. So it's a lot less restricted. There's flexibility in how they go about it. But CDAs, again, have been a tool that's been used by several credit unions for many years in those charitable endeavors that they pursue as an institution, so, as a mission-driven organization, I have the ability to fund my charitable endeavors through alternative means.
Speaker 3:Absolutely. It's trying to make it as easy for institutions as possible to do that, as opposed to just having to cut a check every year, which is fine too, and many institutions still do that. But if you wanted another way to make those donations and to support those charitable organizations, these investment accounts, these hybrid vehicles, allow institutions to take excess funding that they have or investments in the portfolio and contribute part of those earnings to that charity, which leads us to Renee.
Speaker 2:So, Mike, I'm going to say and right. So how I see it, because I'm a simple person, I don't do investments. That's Jason's area.
Speaker 2:What I see is that sometimes the credit unions cannot directly write a check, so for some of those credit unions they're going to do investments. All credit unions do investments. So for me I call it pretty simple If you can't write a check and you want to support, talk to Jason. He'll get you hooked up with a CDA. That's significant, will share in the profits and you're still contributing to a great mission-driven organization.
Speaker 1:Let's talk about that more Renee. So talk to me about the AACUC's Future Fund.
Speaker 2:Wow, well, let's see. So the AACC Future Fund is designed to support and expand our critical programming that addresses the racial wealth gap, preserves small credit unions that's my big thing preserving small credit unions, lifting up low-income communities and spreading financial access and inclusion to the underserved. The AACC Future Fund also creates an operating reserve that will ensure that the continued reach of AACUC is across the credit union movement for years to come.
Speaker 1:So now, how do charitable donation accounts tie into the Future Fund?
Speaker 2:Well, the resources that will come from that helps us to stand up four pillars for ACC. One of them is internships and leadership development programs that are essential to, I feel, the future of the credit union movement. That are essential to, I feel, the future of the credit union movement. Also, it's ensuring the small credit unions' sustainability. You know we have all these companies talking about how can we solve for small credit unions. Well, I'm tired of talking about it. I say let's do something about it. So, while ACC has these great programs and services, we haven't been able to scale. Investing in this will help us scale critical programming and also, you know, wealth building and community impact initiatives. Those programs need resources, they need bodies, they need people to do the work and then the outreach to go out that goes along with it and then, of course, as I said, as the operating reserve, trying to make sure that we're here for a very long time so that we continue the great work we're doing in the credit union system.
Speaker 1:So, jason, how are you or how are we ALM First supporting the Future Fund?
Speaker 3:Now this is really a great initiative. I know they officially announced the Future Fund at the GAC in March, but it didn't start in March. Fund at the GAC in March, but it didn't start in March. This has been a lot of effort by Renee and the entire team and Denise Aguini, who's been helping and supporting her in this effort as well. And I mean I started conversations originally.
Speaker 3:If we take a step back a little more than a year ago and it's look like anyone who's been involved in charities, like I have, you know you're trying to fund all these long term initiatives and strategies and trying to have the predictability and consistency of funding. It's not easy. You go through different cycles, different economic cycles, different political cycles, and I can't do long term initiatives and short term funding all the time without a little bit more certainty. And so this future fund, I think, is a great idea on that front. But it then came to discussion a little over a year ago. How can we help support that? So can we create an investment vehicle that could do this? And we talked about multiple things. We talked about CUSOs as one potential path and we talked about CDAs, and then we ultimately landed on the idea that CDAs seem the best path forward and we talked about before.
Speaker 3:CDAs aren't new per se. We've been managing them for several years for credit union clients. They're typically done so, though, as a separately managed account, where some of these institutions already have foundations of their own that they created, and we manage a CDA portfolio for the benefit of funding that foundation. But what we haven't seen done before in the industry is getting multiple credit unions together for a single charitable organization where it's a commingled vehicle in that way, so you can have 50 different credit unions come in and invest in the same fund to benefit a single charitable organization like the AACUC, and so we're we're really excited about that, we're proud of it, that we think it's absolutely going to be a successful roadmap and contribute possibly for this overall, this future fund effort that Renee and her team have been working on. You know the nice thing to me for credit unions that do this there's also a streamlined nature efficiency. By doing it this way, the fund is automatically going to make the donations to the AACUC. The AACUC is the beneficiary, the ACC is the beneficiary.
Speaker 3:We created the fund for the benefit of having donations made on the behalf of those credit unions who invest in it. So you know, if you do a regular CDA, some people might be familiar with it. Well, I got to keep track of you know. Have I made up the minimum amount of donations that are necessary under the NCUA regs over the time period I'm supposed to do it? Am I cutting the? I got to cut the check out of the proceeds, all those different things. The nice thing about this fund is that all that's done for you by the third party fund administrator. So we ALM First just does what we do. Well, we're the portfolio manager that's our role in this and you have a custodian holding the assets and you have a fund administrator that will cut those checks to, not only to the AACUC, but the portion that the investor is entitled to as well. They will receive that. So it's really streamlined in that manner. That, we think, makes it a very efficient for all parties involved.
Speaker 1:So you manage the money. Renee has predictability in terms of the income coming in Right and so what percentage of the proceeds goes to AACUC and what percentage goes back to the investor?
Speaker 3:Good question.
Speaker 3:So the way that we we created the fund is for 75 percent of the distributable income to go to the AACUC and 25% to go to the investor.
Speaker 3:The way distributable income is defined is I'll take a quick step back before getting to that Because it's an investment fund, credit unions have to account for it in the same way they would for any mutual fund or equity investment. So to limit the periodic, the month-to-month, the quarter-to-quarter price volatility there's no stocks in the fund, it's all fixed income and we're actually hedging it on a day, actively hedging the portfolio's interest rate risk on a day-to-day basis so that we can protect that stream of income and not have the volatility of price. So that distributable income, since they're all bonds, it's the income, the coupon payments from those bonds and any realized capital gains or loss of an investment sold, the unrealized portions held back. That's an important aspect because the way that the NCUA regs, requiring sending the total return, can create some headaches. So we have all that smoothed out within the NCUA framework. That makes it more efficient and better, in our opinion, beneficial for not only the ACUC but for the investor as well.
Speaker 1:So Jason's earning the money. Renee, you're getting the check Now. You started to touch on this. Now where do the proceeds go? I know it's long-term sustainability and I'm sure you've got a whole host of things that are targeted or earmarked for these proceeds, but talk to us a little bit about this. As a credit union manager, why do I want to invest in this? Where's the money going? How am I helping the industry, and AACUC specifically?
Speaker 2:Well, I'm always full of ideas, and one idea I had was to have the 400 plus billion dollar credit unions give five thousand dollars and set that up as a fund and and have that be something that's revolving for small credit union CEOs and help them with their retirement. I'm full of ideas, but they've gotten down to four pillars, and so in these four pillars, we talk about internships and leadership. So imagine if the credit union system, which is in 2030, 2030, 2040, our whole United States of America is going to change. The landscape is going to look different, and so if we don't put people in positions that look like people of color, that look like people of color, we're not going to have the right people waiting on the people who are in the lines or the members at the credit unions. And so imagine if you have a pipeline that you can already go to internships, people of color learning how to be a worker in a credit union, leadership opportunities. Imagine if we're creating these positions in the C-suite.
Speaker 2:Like I said, aacc has these programs, but we don't have them to scale. So imagine if we were able to scale and these credit unions can use AACC as a resource, which some already do, but as a greater resource for the credit union industry. Also, the wealth building initiative part of it. Imagine there's such a huge divide with the wealth gap, so if we could shrink that gap by any means, that's a way to do that Having the tools and the resources to go out there with programs and services that educate people and help bridge that gap. Not everybody does it, like Jason, and they're part-time looking for investments.
Speaker 2:So imagine if we could have people who are trained in doing investments and putting that as part of their financial life. Imagine I know that for Jason that must be a dream come true If everybody were to be looking at not just savings but investments as well. Right, what a world we could be. And then, of course, the small credit unions. Sustainability that is something to me that is high priority. Like nobody's business, if we don't solve and save our small credit unions, we as an industry credit unions will not exist.
Speaker 2:I believe it wholeheartedly that it's up to us to take care of us in the credit union system. Banks aren't going to do it. They're not going to lend a hand like that Community banks might, but I wouldn't say the big banks would to bring our small credit unions up, bring them to scale with digital marketing, with leadership opportunities. Sometimes the small credit unions merge with the larger credit unions because the CEO needs a retirement. So imagine if we could have some of these proceeds going into building a reserve for small credit unions CEOs that is attached to their retirement. I just see this world that this is changing because we're able to scale some of our products and services.
Speaker 1:That's great. Now the fund is launched, correct?
Speaker 3:The fund is launched.
Speaker 3:So where are we at?
Speaker 3:It was a lot of work, a lot of discussions, and that's great, because when you do something new there's just a little bit of extra education on that front and, like I said, cdas weren't new, but doing it in this fashion was, and the focus initially was to get three long-term supporters of the AECUC, three of the largest credit unions in the industry, to start as anchor investors of the fund.
Speaker 3:They committed initially a little over $25 million to start, which began in late June, and we have commitments right now for $36 million over the next 12 months. But that's without really broadly going out and having discussions with other credit unions. Hence the point of this podcast of building awareness of what has been worked on and what's now available for all credit unions to potentially to come in and support. So I'm really excited. It was a lot of work by everybody involved getting to this point, but that's what it takes, and now is still a lot of work to go, but the fun part of seeing the fruits and getting other credit unions who I know are going to want to be supportive of this and as long as they get educated and understand it, this is just a great opportunity, a means to support an organization that many credit unions have been supporting for a while anyway.
Speaker 1:So you know I asked the question earlier. You know why should credit unions support this? Now let's go to. How can credit unions support this? If I'm interested, what are my next steps? How do I become part of this? How do I learn more?
Speaker 3:We definitely have information that we've put together some fact sheets. There's any. The quickest way I'd say there's an email address for this particular fund, the CDA fund. If you email aacuc at almfirstcom, that will find its way to my desk and the whole team is available to answer questions specifically about how you can contribute to the CDA fund to support the AACUC Future Fund. I know many know Renee in this industry and I know she is happy to take any phone calls on this topic and provide more information. But yeah, I mean there'll be more information coming out, we'll have it on our website. The AACUC already has information on its website about the future fund and the various ways to support it. So more exciting information to come.
Speaker 2:But I want to be very, very clear about why ALM First is so important to us, and clearly it goes without saying. First of all, more than 75% of the largest credit unions are ALM First clients, and that speaks volumes to both AACC and its supporters. The ALM First has a 30-year track record of creating solid platforms for the AACC, because credit unions know and trust your work. And then, of course, across the credit union movement, there's no other firm that rivals the investment management expertise of ALM First, and they didn't pay me to say that. It's true, and what people know about me is that I'm not linking AACC up with organizations that don't do things in an excellent fashion. Excellence is what we do. That's our hallmark. That is something I'm very proud about. When you think about AACC, you think about excellence, and that's how I feel about ALM First, especially under Emily's direction. So thank you Truly, thank you for even taking up the project.
Speaker 1:Well, thank you, renee. I appreciate the kind words. That's awesome. It's great that two well-respected, well-run organizations have come together in this endeavor, because it certainly is for the right reasons and the reasons that credit union exists. So that's pretty exciting to me. So you know, as we wrap up here, you know what and we'll start with Renee what should I have asked you, or what's something that you want to leave the audience with?
Speaker 2:That one and thank you again for having me but one that AACC truly is trying to be the heart, not necessarily soul. We've got a little soul, though, for the credit union industry, and I want to say thank you to Jason publicly. I just want you to know that the entire AACC team wants to express appreciation to you and ALM First for your innovative thought and leadership and dedication in launching this. This was truly a groundbreaking initiative and a lot of hard work, and I couldn't be more pleased at our outcome so far. I am happy, I am encouraged. I tell you, having Ty as our chair for this fund, for this part of it, and having my hero for this part of it and having my hero, bill Cheney, be our honorary chair, that speaks volumes as to why they said yes, and that's because of ALM First and you, jason. So thank you.
Speaker 3:No, thanks. So much, renee. I mean, there are things that I do as you would imagine being an investment portfolio manager, bond guy. There's a lot of mundane stuff that I do as you would imagine being an investment portfolio manager, bond guy. There's a lot of mundane stuff that I do in my day-to-day over the career and that's fine.
Speaker 3:I like it. This has truly been a privilege, one of the more exciting things I've worked on over the last 12 months, and a lot of that's just the people it's working with Renee and Denise and Grace, who will never let you miss a meeting or a a meeting?
Speaker 2:Absolutely not. The general is on it. I tell you, between Denise and Grace, I am being treated with kid gloves. They take such good care of me. And I tell you, general Sanchez and Denise, they're two heavy hitters. Without them on my team I'd be a hot mess.
Speaker 3:Absolutely, and Ty and everyone else on the board. But to me that was the fun part, because you get to see again the fruits. I have lots of hope and a lot of confidence as well that credit unions will come together and support this endeavor because they will believe in it as well, and it's just creating a path for them to do so, and I think that has been done, and now it's just for institutions choosing to participate and support.
Speaker 1:Well, thank you so much. I appreciate both of you, renee and Jason, for being on the podcast and to our listeners. Be sure to reach out to Renee or Jason for any more information and how you can be part of this exciting new endeavor.
Speaker 3:Absolutely.
Speaker 1:Thanks so much.
Speaker 2:Excellent, bye now.
Speaker 1:Once again, I would like to thank our guests, renee Saddy-White and Jason Haley, for joining us today. The NCUA Board approved its CDA rule at their December 2013 meeting. Alm First has been managing these types of portfolios. Starting shortly after that. The rule defined a CDA as a hybrid charitable and investment vehicle that a federal credit union may fund to provide charitable contributions and donations to a qualified charity. The requirements are that a credit union can only have up to 5% of their net worth in these types of investments and that 51% of the proceeds need to be distributed to a qualifying charity over a five-year period. And let me just clarify when I say 51%, that's a minimum of 51% need to be distributed over that five-year period.
Speaker 1:Today, we discussed the creation of a new, groundbreaking donor advised fund, which takes the guesswork out of the donation process, provides reliable income streams to the beneficiary and create sustainable funding, in this case for AACUC's mission-driven endeavors. To learn more, please reach out to Jason or Renee directly, or you can email aacuc at almfirstcom. At the end of each episode, I'd like to take a moment and let you know about some of the additional resources that ALM First has available. We have a robust workshop, conference and webinar schedule, so be sure to visit our website for more details on these, as well as our Education Hub and Resource Center for recorded webinars, articles and more. As always, stay safe, stay healthy, and thank you for listening to In your Best Interest. An ALM First podcast.
Speaker 5:The content in this podcast is provided for informational purposes and should not be relied upon as recommendations or financial planning advice. We encourage you to seek personalized advice from qualified professionals regarding all investment decisions. Current and future holdings are subject to risk, and past performance has no guarantee of future results. Podcasts should not be copied, distributed, published or reproduced in a whole or in part. Information presented herein is for discussion and illustrative purposes only, and is not a recommendation or an offer or solicitation to buy or sell any securities.
Speaker 5:The views and opinions expressed by the ALM First financial advisor speakers are their own as of the date of the recording. Any such views are subject to change at any time based upon market or other conditions, and ALM First Financial Advisors disclaims any responsibility to update such views. These views should not be relied on as investment advice and, because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any ALM First Financial Advisors product. Neither ALM First Financial Advisors nor the speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Alm First Financial Advisors is an SEC-registered investment advisor with a fiduciary duty that requires it to act in the best interest of clients and to place the interests of clients before its own. However, registration as an investment advisor does not imply any level of skill or training.
Speaker 4:Please be aware that certain statements made by our guests during this discussion may be considered endorsement under SEC regulations. Specifically, these statements could be interpreted as indicating approval, support or recommendation of the investment advisor or its supervised persons, or as describing the guest's experience with the investment advisor or its supervised persons. In compliance with these regulations, we want to clarify that the guest featured in this discussion is neither a current client nor an investor with the investment advisor. Furthermore, no compensation was paid to the guests in exchange for their statements. It is also important to consider potential conflicts of interest, as the AACUC receives 75% of the net proceeds from the AACUC Future Fund, which may create an incentive for the guests to make positive statements about ALM first. Please take this into consideration when evaluating statements about ALM first. Please take this into consideration when evaluating statements made during this discussion.
