Social Impact Bond ETFs That Support Veterans and Minority Borrowers

Last week, I profiled the Simplify Health Care ETF (PINK) and the U.S. Defense ETF (DUTY), both of which stand out for donating a portion of their profits or management fee revenue to charitable causes tied to breast cancer research and veteran support.

PINK and DUTY are unique, but they are not the only way ETFs can incorporate social impact. Another approach is to invest directly in assets that are intended to improve outcomes for specific groups.

Today’s examples take that route. Both are fixed income ETFs rather than equities. One focuses on lending to U.S. service members, veterans, and veteran-owned businesses. The other targets mortgage-backed securities linked to lending in low-income, minority, and historically underserved communities.

Academy Veteran Bond ETF (VETZ)

VETZ was the first ETF designed to primarily invest in loans tied to the military and veteran community. It currently has about $108 million in assets under management and charges a 0.35% expense ratio.

The fund is managed by Academy Asset Management, a service-disabled veteran-owned firm. Beyond asset management, the firm is known for its mentorship programs that connect veterans with Wall Street professionals to help with career transitions and advancement.

From a portfolio standpoint, the ETF invests primarily in government-backed mortgage securities issued by agencies such as Ginnie Mae, Fannie Mae, and Freddie Mac. It also allocates to pools of small business loans backed by the Small Business Administration.

The key distinction is who those loans are made to. At least 80% of the underlying exposure is directed toward U.S. service members, military veterans, their families, survivors, and veteran-owned businesses.

Structurally, this still behaves like a traditional mortgage-backed securities fund. It is benchmarked to the Bloomberg U.S. MBS Index and currently offers a 30-day SEC yield of about 5.75%. Performance has been in line with that exposure. Over the past year, VETZ delivered a 5.9% annualized return at net asset value, slightly ahead of the benchmark’s 5.79%.

If you are already using mortgage-backed securities as a lower-risk component in a portfolio, this is a way to maintain similar exposure while aligning capital with a specific community.

CCM Affordable Housing MBS ETF (OWNS)

OWNS takes a different approach, focusing on housing and community development. Its mandate is tied to improving access to credit and addressing the affordable housing gap in the U.S.

At least 80% of the portfolio is invested in mortgage-backed securities, but with specific screening criteria applied to the underlying loans.

These include loans made to low- and moderate-income borrowers, workforce and minority borrowers, and loans in racially or ethnically concentrated areas of poverty. The fund also targets loans in persistent poverty counties and majority-minority census tracts.

A key feature is its alignment with the Community Reinvestment Act of 1977. At least 51% of the portfolio is invested in mortgage-backed securities that the advisor believes qualify under CRA guidelines. This matters because banks subject to the Act receive regulatory credit for holding these types of assets, often referred to as “CRA credit” or “OWNS for banks.”

OWNS currently has about $102 million in assets under management and charges a net expense ratio of 0.30%, waived down from 0.68% gross. Like VETZ, it is benchmarked to the Bloomberg U.S. MBS Index. Its 30-day SEC yield is around 4%, according to Morningstar.