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Sustainable Funds Attract Record Flow: 4 Funds to Buy
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Environmental, social and governance (ESG) investing emerged a winner last year even while the pandemic wrecked havoc globally. Most ESG funds are tech-heavy and have significant exposure to medical stocks, and the pandemic-led remote working and stay-at-home trends pushed technology stocks higher and progress in coronavirus vaccine or treatment boosted healthcare players. Hence, the rally behind these socially-responsible funds is self-explanatory.
Per a Morningstar report, U.S. Sustainable Funds had net flows of $51 billion in 2020, which is more than double the total for 2019, i.e., $21.4 billion, and nearly 10 times more than in 2018. In fact, Sustainable fund flows made nearly a quarter of overall net flows into stock and bond mutual funds in the United Stateslast year. The report also states that investors put in $20.5 billion into ESG funds in the last quarter of 2020, setting a quarterly record and doubling the previous record for a quarter. In fact, last year, sustainable funds drew in about $10 billion in each of the first three quarters, which exceeds any quarter before 2020. At the end of 2020, assets in U.S. sustainable funds reached $236.4 billion, more than 70% in comparison to 2019.
Factors Pointing at Continued Acceleration in 2021
Given the solid growth of ESG funds in 2020, many might question if the northward trend will continue this year too. Well, there are a couple of factors indicating that sustainable funds will continue to rally in 2021. The pandemic, climate change, the movement for racial justice, and the presidential election of 2020 and its aftermath are likely continue to be major catalysts to markets movements. Vaccination will help the economy reopen and recover rapidly. Additionally, the changes brought in by President Joe Biden focusing on more clean and green environment will support ESG funds.
ESG-focused companies also emphasize on future pandemic preparedness, hence lessons learned in this pandemic will continue to influence enterprise risk management evaluations, and supply chains will likely be the subject of further scrutiny. A post-pandemic “green" recovery could boost companies producing more sustainable low-carbon products and investors should also align their investments keeping broader societal concerns in mind.
3 Funds to Buy
We have, therefore, shortlisted three ESG-focused mutual funds. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Calvert Equity Fund Class A (CSIEX - Free Report) aims for growth of capital through investment in stocks believed to offer opportunities for potential capital appreciation. The fund invests majority of assets in common stocks of companies that rank among the top 1,000 U.S.-listed companies.
This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, CSIEX has a three and five-year returns of 21.2% and 18.1%, respectively.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSIEX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.99% compared to the category average of 1.04%.
New Alternatives Fund Class A (NALFX - Free Report) seeks long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities such as real estate investment trusts and American Depository Receipts etc.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has a three and five-year returns of 24.4% and 21.5%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.08% compared to the category average of 1.29%.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests majority of assets in mid-sized growth companies.
This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, PARNX has returned 14.7% for both three and five-year periods. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.84%, which is below the category average of 1.16%.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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Sustainable Funds Attract Record Flow: 4 Funds to Buy
Environmental, social and governance (ESG) investing emerged a winner last year even while the pandemic wrecked havoc globally. Most ESG funds are tech-heavy and have significant exposure to medical stocks, and the pandemic-led remote working and stay-at-home trends pushed technology stocks higher and progress in coronavirus vaccine or treatment boosted healthcare players. Hence, the rally behind these socially-responsible funds is self-explanatory.
Per a Morningstar report, U.S. Sustainable Funds had net flows of $51 billion in 2020, which is more than double the total for 2019, i.e., $21.4 billion, and nearly 10 times more than in 2018. In fact, Sustainable fund flows made nearly a quarter of overall net flows into stock and bond mutual funds in the United Stateslast year. The report also states that investors put in $20.5 billion into ESG funds in the last quarter of 2020, setting a quarterly record and doubling the previous record for a quarter. In fact, last year, sustainable funds drew in about $10 billion in each of the first three quarters, which exceeds any quarter before 2020. At the end of 2020, assets in U.S. sustainable funds reached $236.4 billion, more than 70% in comparison to 2019.
Factors Pointing at Continued Acceleration in 2021
Given the solid growth of ESG funds in 2020, many might question if the northward trend will continue this year too. Well, there are a couple of factors indicating that sustainable funds will continue to rally in 2021. The pandemic, climate change, the movement for racial justice, and the presidential election of 2020 and its aftermath are likely continue to be major catalysts to markets movements. Vaccination will help the economy reopen and recover rapidly. Additionally, the changes brought in by President Joe Biden focusing on more clean and green environment will support ESG funds.
ESG-focused companies also emphasize on future pandemic preparedness, hence lessons learned in this pandemic will continue to influence enterprise risk management evaluations, and supply chains will likely be the subject of further scrutiny. A post-pandemic “green" recovery could boost companies producing more sustainable low-carbon products and investors should also align their investments keeping broader societal concerns in mind.
3 Funds to Buy
We have, therefore, shortlisted three ESG-focused mutual funds. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Calvert Equity Fund Class A (CSIEX - Free Report) aims for growth of capital through investment in stocks believed to offer opportunities for potential capital appreciation. The fund invests majority of assets in common stocks of companies that rank among the top 1,000 U.S.-listed companies.
This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, CSIEX has a three and five-year returns of 21.2% and 18.1%, respectively.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSIEX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.99% compared to the category average of 1.04%.
New Alternatives Fund Class A (NALFX - Free Report) seeks long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities such as real estate investment trusts and American Depository Receipts etc.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has a three and five-year returns of 24.4% and 21.5%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.08% compared to the category average of 1.29%.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests majority of assets in mid-sized growth companies.
This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, PARNX has returned 14.7% for both three and five-year periods. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.84%, which is below the category average of 1.16%.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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