If you’re an advisor new to SRI, you probably struggle to fill the equity and fixed income style boxes. One of the most common complaints I hear is that there are not enough competitive funds to properly diversify a portfolio for the client who wants most of their assets invested in SRI. To support advisors I work with to overcome this hurdle, I’ve developed a list of SRI funds that I call my “As Good As” list.
Every calendar quarter I report on the performance of a list of 15 – 20 actively managed and ETF index mutual funds that use some combination of ESG criteria in the securities selection process. Several of the funds have been available to investors for over 20 years. I track the performance of all the funds against a Lipper index for a minimum of least three years and up to ten years. In order to stay on my “As Good As” list, funds must have a total return at least equivalent to the index benchmark for the 3 to 10 year tracking period.
What’s the Verdict?
Assuming my calculator and portfolio allocation software are working, the “As Good As” list provides style box diversification as well as competitive performance. 80% of the funds are ranked 4 or 5 Lipper Leaders for total return. Two-thirds of them have outperformed the index benchmark in two of the past three years, and a majority of them have outperformed the benchmark for the three year period ending March 31, 2013.
In addition, the stock funds cover the equity style boxes in the Morningstar Snapshot portfolio illustration in a way that meets modern portfolio theory and fiduciary standards for market volatility and category specific risk. The fixed income style box coverage is less complete, but well positioned against interest rate volatility.
As an advisor, you can create your own list. Start your research with the mutual fund list at USSIF’s website: www.ussif.org. You’ll be surprised at the cross section and number of categories that Bloomberg tracks for USSIF.
You should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing.