ESG investors like gains as much as anyone else

Flows into environmental, social and governance funds often follow performance

Jul 10, 2017 @ 1:10 pm

By John Waggoner

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.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Dynasty's Penney: Top RIA trends for 2018

What's next for RIAs? Dynasty's Shirl Penney talks about the growing numbers of entrepreneurial advisers. Plus, what inspired his own entrepreneurship.

Latest news & opinion

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print