Original, independent, thought leadership
sustainable invest

Chart of the Week – May 27, 2024: Smallest sustainable funds

Home » Research » Chart of the Week – May 27, 2024: Smallest sustainable funds

Share This Article:

The Bottom Line: Small sustainable fund firms may introduce unique or innovative investment opportunities, but investors should exercise caution when considering making investments in them.        

Notes of Explanation: Fund firms listed in descending order based on total net assets as of April 30, 2024. Sources: Morningstar Direct; Sustainable Research and Analysis LLC.  

Observations:  
  • Management of focused sustainable fund assets under management are highly concentrated, with 90% of net assets in the US controlled by 25 firms. This, out of a total of 154 firms with sustainable fund offerings, either mutual funds or ETFs or both. At the other end of the range, the bottom 25 firms manage just $150.5 million in assets, or less than 1% of assets. These firms and their funds, which most often includes just one fund, range in size from a low of $0.8 million to a high of $12.2 million.
  • Some of the smallest fund firms bring to market unique and innovative products, such as exposure to innovative and sustainable solutions in the food and materials sectors, carbon credits or ocean health-related companies. However, unless the associated small funds in this category are managed by deep pocketed management firms or they succeed in building up their assets under management quickly, they are less likely to survive. For example, between the start of 2023 through April 30, 2024, 12 of the smallest fund firms offered by the bottom 25 funds, or 44%, have been liquidated.
  • The smaller funds, on average, tend to subject investors to higher expense ratios and their portfolios may struggle to achieve effective diversification, liquidity, and trading efficiencies. In the process, tracking results could suffer along with performance outcomes. Also, portfolios may shut down without much advance notice.
  • Investors attracted to new and unique fund offerings that don’t have reasonable substitutes are encouraged to monitor these new funds rather than invest in them at the time of their launch, unless offered by established management firms with sustainable businesses. That said, this is still not a fail-safe approach. In general, it may be prudent to avoid such investments until the funds reach about $30 to $50 million in net assets under management.
 
YOU MAY ALSO LIKE
$99.99
PER YEAR

Premium Articles Access Priority Support 1 Fixed Price

Free Trial
30 Day

Access to All Data No Credit Card Required Cancel Any Time

9.99
Monthly

Access to Premium Articles Priority Support Save 25%


Sign up to free newsletters.


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Research

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. 

Independent source for sustainable investment management company research, analysis, opinions and sustainable fund disclosure assessments