Socially Responsible Small Cap Mutual Stock Funds
Can Small Companies be Sustainable and Profitable?
If you're looking for a mutual fund that applies socially responsible strategies and invests in small companies, these can be somewhat hard to find. Its a challenge mainly because large companies tend to be sustainability leaders and smaller companies who are innovating in new ways tend to be privately held or are B Corporations or other forms of new social business such as is seen in the world of Impact Investing as per this recent JPMorgan report. However, a number of funds have found quality financial performance while seeking to invest in smaller listed companies.
Here's a list of small-cap equity funds that have existed for the past ten years or more and how they have been doing. Most socially aware public mutual funds focus on large companies, but these managers focus primarily on companies with a total market capitalization of less than $2 or 3 billion.
Calvert Small Cap Value Fund
Formerly known as Calvert New Vision Small Cap, this fund was merged into the Calvert Small Cap Value Fund in 2010, ticker symbol CCVAX.
This fund positioned itself as follows: "Calvert's social investment research analysts examine corporate performance in seven broad areas of concern for Calvert's socially responsible mutual funds: Governance and Ethics; Workplace; Environment; Product Safety and Impact; International Operations and Human Rights; Indigenous Peoples' Rights; Community Relations."
Over the past ten years, the fund had an annual average return of +5.18% versus the benchmark Russell 2000 +4.92%, with even more dramatic outperformance over 1-, 3- and 5- years not too long ago.
However the fund has been down over 7% earlier in 2016 and only 160M US Dollars in assets, and carries a sizeable 4.75% front load.
Though not a pure small-cap fund, Ariel Fund (ARGFX) is a small to mid-cap fund seeking to own companies worth between $1 and $7.5 billion. Over 80% of their holdings are small caps, so this fund qualifies as a small-cap fund in our book.
Ariel Fund's approach is "built on the basic principle of targeting undervalued companies that show a strong potential for growth."
Ariel Fund managed just over $2 Billion as of the end of 2015, making it the largest US sustainable fund with a sizeable small-cap allocation.
Over 5- and 10- years it has outperformed its chosen Russell 2500 Value Index.
Ariel Appreciation Fund is another fund of this firm with some small-cap stocks, but only comprises 10-15% of that portfolio at present.
Stock symbol: PXSCX
A 4 star Morningstar fund, Pax World Small Cap has roughly $500M under management, and per their website, since its launch in early 2008, has delivered higher returns with lower volatility.
Over 5 years the fund was recently +8.74% per year on average while its benchmark Russell 2000 was +7.25%.
Stock symbol: PARMX
Parnassus Small Cap (previously PARSX) was merged into Parnassus Mid Cap, now a 5 star Morningstar Fund with over $500M in assets.
The fund "invests with low turnover and high conviction in approximately 40 holdings. The Fund seeks to invest in companies with:
- Wide moats or strong competitive advantages that protect market share and profitability
- Relevancy over the long term, which provides a compounding growth component
- Quality management teams that will act in the best interest of shareholders
- Favorable three-year investment horizon
The Fund strives to outperform the Russell Mid Cap Index over the long-run on a risk-adjusted basis with a high active share. The Fund attempts to shield investors from losses during bear markets."
The fund has performed similarly to its benchmark over the past 5 years.
Winslow Green Growth Fund
Formerly Stock symbol: WGGFX, and a personal favorite, Winslow Green Growth suffered during the financial crisis and sadly no longer exists.
After being an outperforming fund earlier in the 2000's, its blend of seeking environmental solutions in smaller listed companies did quite poorly when the crisis played out, and the firm ultimately was sold to Brown Advisory, which now instead runs a large-cap fund.
Winslow's former head Jackson Robinson now works with Trillium, who bought Portfolio 21 and is also a long time leader in shareholder engagement.