Hundred dollars in the green grass
Social investors like funds that do good, but they love funds that do good and do well.
Consider Parnassus Endeavor Investor (PARWX), up a blistering 31.0% the past 12 months, versus a 17.9% gain for the Standard & Poor’s 500 stock index. The fund has seen a net new inflow of $2.2 billion in the same period, according to Morningstar Inc.
The Parnassus funds, long a leader in the environmental, social and governance movement, have gained $4.4 billion in net new assets the past 12 months, and $7.9 billion the past three years, thanks in part to the funds’ growth-oriented investment process.
(More: Impact investing in the age of President Trump)
But hot performance has attracted money to other funds:
• Vanguard FTSE Social Index (VTFSX), up 21.4% the past 12 months, has seen $1.4 billion in net new cash.
• DFA USA Sustainability Core (DFSIX), up 20.4% the past 12 months, has seen $214 million in net new money.
• SPDR S&P 500 Fossil Fuel Free ETF (SPYX) has attracted $31.7 million this year, thanks in part to its 12-month gain of 19.2%.
The average socially conscious fund has edged out the S&P 500 the past 12 months, gaining 18.6%, according to Morningstar. Part of the reason could be the collapse in oil prices. ESG funds tend to be light on oil because of environmental concerns. The Parnassus Fund (PARNX), for example, has no energy stocks in its portfolio. And that has worked out just fine. Energy stocks have tumbled 35% since oil’s peak of $105 a barrel in June 2014.
(More: Withdrawal from Paris accord will spur interest in ESG, advisers say)
Some funds faltered despite the boost from a lack of oil. Praxis Small Cap Index (MMSIX), for example, gained just 10.1% the past 12 months, thanks in large part to the poor performance of small-company stocks. The fund watched an estimated $2.1 million flee. And Gabelli ESG (SRIDX) gained 11.4%, but lost an estimated $12.1 million in assets.
Fund flows can be capricious, however, and performance isn’t the only factor. TIAA-CREF Social Choice Equity (TISCX), for example, has turned in an outstanding 18.9% gain the past 12 months, yet has watched an estimated $504 million walk out the door. Similarly, Eventide Gilead (ETGLX), which has leaped 28.3% the past 12 months, has watched $370 hit the exits.
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