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Chart of the Week – May 13, 2024: April performance of sustainable funds

Notes of explanation:

Home » Research » Chart of the Week – May 13, 2024: April performance of sustainable funds

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The Bottom Line: Sustainable funds posted an average -3.2% in April, while the leading Commodity Funds category added 7.2% and the lagging category dropped 58.9%.       

Notes of explanation:

Notes of Explanation: Sustainable funds fall into one of 75 fund categories, as determined by Morningstar Direct. Returns are the average returns for each category for April 2024 and trailing 12-months. Sources: Morningstar Direct and Sustainable Research and Analysis LLC.


Investor optimism shifted to lower gear in April, but corporate earnings provided some ballast

Investor optimism during the first quarter of the year shifted to lower gear in April as investors came to realize that interest rates are not likely to move lower any time soon and Middle East tensions escalated. Investors, who had expected as many as six interest rate cuts in 2024, have come to realize that rate cuts may not be implemented this year due to a lack of further progress on the inflation front and stronger than expected economic growth, jobs, and higher wages. At the same time, corporate earnings came in above the 1% estimated gain and provided some ballast to the equity market which gained 1.4% after April 19th to end the month on better footing. All three major indices declined in April, with large cap growth stocks outperforming value stocks but the reverse was true for small cap stocks. The S&P 500 Index recorded a 4.08% total return decline, while the Dow Jones Industrial Index and NASDAQ Composite gave up 5.05% and 4.38%, respectively. The Russell 2000 Index, consisting of small companies, dropped even lower, giving up 7.04%. Ten of the eleven large cap index sectors reflected declines in April, with the Real Estate sector posting the lowest return at -8.62% while the Utilities sector was positive at 1.59%.

Intermediate investment grade bons gave up 2.53% in April and registered a year-to-date decline of 3.28%.

After finally recording a monthly gain of 0.9% in March, bonds sold off as 10-year Treasury’s posted the highest yield so far this year, ending the month at 4.69% versus 4.20% as of March 28, 2024. Against this development, the Bloomberg US Aggregate Bond Index gave up 2.53% and registered a wider year-to-date decline of 3.28%.

Bolstered by emerging markets, stocks outside the U.S. dropped by 1.8%.

Outside the U.S., the MSCI ACWI ex U.S. registered a decline of 1.8%, benefiting from the stronger performance in emerging markets that recorded an increase of 0.45%.

Sustainable funds registered an average decline of 3.2%, with over 93% of funds posting declines

Against this backdrop, focused sustainable mutual funds, and ETFs, including money market funds, a total number of 1,523 funds/share classes, 75 fund categories or fund classifications, and $333.4 billion in assets under management at the end of April, as classified by Morningstar, registered an average decline of 3.2%. Focused long-term sustainable funds produced similar one-month results. Returns across taxable bond funds, international equity funds and U.S, equity funds varied, ranging from an average decline of 1.6%, to -3.1% and -4.7%, respectively. Only 97 funds/share classes, or 6.4% of sustainable funds recorded positive results for the month.

The ten top performing sustainable fund categories, all posting positive average returns, gained an average return of 1.3% in April while the ten worst performing categories registered an average decline of 7.9%.
Commodities Focused funds and Trading-Leveraged Equity fun ds were the best and worst performing sustainable fund categories in April

Commodities Focused funds, ten funds in total, posted the best average return, up 7.2%. The category, tracking mutual funds, ETFs and ETNs, was led by the highly volatile iPath Global Carbon ETN (GRNTF). This small $4.7 million exchange trade note that tracks the performance of the most liquid carbon-related credit plans in the global marketplace gained 11.88% in April but still failed to overcome its underperformance that on a trailing 12-month basis still left the fund in red by -22.4%. The next best performing fund in the same category is the $14.4 million iShares Transition-Enabling Metals ETF (TMET), up 11.47%. The index fund seeks investments that gives it exposure to metals that are essential to a wide range of clean energy technologies supporting the transition to a low-carbon economy.

At the other end of the spectrum, two small ETFs that make up the worst performing Trading-Leveraged Equity funds, the $3.9 million Direxion Daily Electric and Autonomous Vehicles Bull 2X ETF (EVAV) and the $3.3 million Direxion Daily Global Clean Energy Bull 2X Shares ETF (KLNE) , registered declines of 62.9% and 55%, respectively.


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Research and analysis to keep sustainable investors up to-date on a broad range of topics that include trends and developments in sustainable investing and sustainable finance, regulatory updates, performance results and considerations, investing through index funds and actively managed portfolios, asset allocation updates, expenses, ESG ratings and data, company and product news, green, social and sustainable bonds, green bond funds as well as reporting and disclosure practices, to name just a few.

A continuously updated Funds Directory is also available to investors.  This is intended to become a comprehensive listing of sustainable mutual funds, ETFs and other investment products along with a description of their sustainable investing approaches as set out in fund prospectuses and related regulatory filings.

Getting started

Many questions have surfaced in recent years regarding sustainable and ESG investing.  Here, investors and financial intermediaries will find materials that describe the various approaches to sustainable investing and their implementation.  While sustainable investing approaches vary and they have thus far defied universally accepted definitions, many practitioners agree that they fall into the following broad categories:  Values-based investing, investing via exclusions, impact investing, thematic investments and ESG integration.  In conjunction with each of these approaches, investors may also adopt various issuer engagement procedures and proxy voting practices.  That said, sustainable investing approaches will continue to evolve.

In addition to periodic updates regarding sustainable investing and how this form of investing is evolving, investors and financial intermediaries interested in implementing a sustainable investing approach will also find source materials that cover basic investing themes as well as asset allocation tactics.

Inesting ideas

Thoughts and ideas targeting sustainable investing strategies executed through various registered and non-registered sustainable investment funds and products such as mutual funds, Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs), closed-end funds, Real Estate Investment Trusts (REITs) and Unit Investment Trusts (UITs). Coverage extends to investment management firms as well as fund groups. 

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