Chart of the Week – September 9, 2024: Top performing funds in August

Observations:

After a sharp stock sell-off at the beginning of August affecting the S&P 500 index as well as other major stock market indices, markets rebounded in response to positive economic data on inflation and retail sales that helped calm recession fears and a signal by the Federal Reserve that it was ready for interest rate cuts. For the full month, the S&P 500 registered a total return gain of 2.4% and 27.1% over the trailing 12-months, the NASDAQ 100 gained 1.2% and expanded the twelve month gain to 27.3% while the small cap Russell 2000 index, whose momentum may have faltered, dropped 1.5% and recorded a trailing twelve month gain of 18.5%. The best performing large cap sectors included Consumer Staples, Real Estate and Health Care, up 5.8%, 5.6% and 5.0%, respectively, while Real Estate and Health Care also ranked in the top three sectors of the mid-cap and small cap indices. Against this backdrop, focused sustainable mutual funds and ETFs, a combined total of 1,446 funds and share classes with $360.6 billion in assets under management, registered an average increase of 1.8% in August and an average 15.4% over the trailing twelve months. Sustainable international equity funds led with an average gain of 2.4% while US equity funds added an average of 1.9%.

The top 10 performing sustainable funds in August, the largest number of which consist of funds investing in real estate, dominated by international real estate, posted an average gain of 6.0% and 15.9% over the trailing twelve months. Results in August ranged from a low of 5.1% to a high of almost 9.0% recorded by the iPath Global Carbon ETN, a small thematic Exchange Traded Note that seeks to provide investors with exposure to the Barclays Global Carbon Index Total Return that measures the performance of the most liquid carbon-related credit plans.

The second-best performing investment vehicle in August is the $7.4 million ETFB Green SRI ETF (named after the fund’s sponsor, the Exchange Traded Funds Bureau, Inc.).  This index tracking fund invests largely in green certified US REITs (real-estate investment trusts) and, to a lesser extent, foreign ones, that also meet strict Sharia Principles involving the elimination of REITs earning more than 5% of their income from interest-bearing investments or from certain business activities or tenants engaged in a restricted list of activities via an exclusionary process. The fund’s returns, along with the performance of the other REIT focused funds, reflects the recent results achieved by the REIT Sector that has soared again in August, posting an increase of 6.4% according to the MSCI US REIT Index and adding to a year-to-date gain that is now positive for the second consecutive month. Investors continued to anticipate a rate cut coming in September and low inflation data throughout the month, helping boost REIT prices that have been lagging through the second quarter of the year.

With one exception, namely the Vert Global Sustainable Real Estate ETF with $412.2 million in assets under management that was reorganized into an ETF structure from a mutual fund at the end of last year, the top performing funds are relatively small, ranging in size from $1.8 million to $16.8 million.