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Sustainable investment funds performance wrap-up: December 2024
Even as the month of December ended on a down note, with the S&P 500 giving up 2.4%, large-cap US stocks delivered their fourth best annual gain over the last decade. Adding 25.02% in 2024 after an increase of 24.23% in 2023, stocks recorded a two-year total return of 53.19%. This was against a backdrop…
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The Bottom Line: Large-cap US stocks delivered another outstanding gain of 25.02% in 2024 while focused sustainable long-term funds added a weighted average of 13.6%.
Large-cap US stocks gave up 2.4% in December but delivered their fourth best annual gain of 25.02% over the last decade
Even as the month of December ended on a down note, with the S&P 500 giving up 2.4%, large-cap US stocks delivered their fourth best annual gain over the last decade. Adding 25.02% in 2024 after an increase of 24.23% in 2023, stocks recorded a two-year total return of 53.19%. This was against a backdrop of better than average expected earnings growth for 2024 and growth of earnings for the fourth straight year, juxtaposed against geopolitical uncertainty, doubts about the economy’s strength and lingering concerns about inflation as well as interest rates, particularly considering reservations associated with trade, taxes and immigration policies advocated by the incoming Trump administration. In fact, some of these considerations have stimulated generally bearish investment outlooks for 2025.
Mid-cap and small-cap stocks didn’t perform as well. Mid-caps dropped .27% in December while posting a gain of 12.88% for the year while small caps returned -8.12% in December but were up 6.82% in 2024 but trailing the S&P 500 by a wide 16% or so. Growth stocks outperformed value stocks across the three market cap categories, and especially for large-cap stocks by almost three-to-one at 36.07% versus 12.29% for value stocks. As for industry sectors, in December three of the 11 sectors posted gains, led by Communications Services that was up 3.49% while Materials dropped 10.91%. For the full year, all large-cap sectors delivered zero to positive returns, ranging from 0.0% for Materials and 40.2% for Communications Services. For mid and small caps, industry sectors posted positive results, excepting for Materials and Energy as well as the Information Technology sectors.
About two-thirds of the stocks that comprise the S&P 500 Index were up in 2024. That said, seven stocks, members of the so called Magnificent Seven, accounted for 53.1% of the S&P 500 2024 rate of return, and posted average gains of 63% over 2024. These include Alphabet, Inc (Google, Class A and Class C), Amazon.com Inc., Apple Inc., Meta Platforms, Inc. (Facebook), Microsoft Corp., Nvidia Corp. and Tesla Inc.
The US led global equity returns while developed as well as developing markets, excluding the US, recorded a twelve-month return of 6.15%
The US led global equity returns. The MSCI ACWI ex USA Index, consisting of developed as well as developing markets, recorded a negative 1.94% return in December and a twelve-month return of 6.15%. Returns would have been worse if not for the inclusion of emerging markets. According to the MSCI Emerging Markets Index, developing markets added 1.86% in December and 14.68% over the full calendar year. This was the best return posted by the benchmark since 2019 when the emerging markets index returned 20.60%, boosted by strong 2024 results posted by Taiwan (35.1%), China (19.7%) and India (12.4%) that are heavily weighted in the index. At the same time, the MSCI EAFE Index, consisting of large and mid- cap companies across developed markets, excluding the US and Canada, was down 2.27% in December and registered an anemic return of 3.82% in 2024.
US bond returns were more subdued in 2024, with intermediate investment grade bonds gaining just 1.25%
While strong returns characterized the large-cap equity market in the US, bond returns were more subdued. In 2024, the Federal Reserve was engaged in navigating an economic soft landing by lowering short-term interest rates three times, ending the year with a target range for short-term interest rates of 4.25% to 4.50%–the lowest since February 2023. For the year, three-month Treasury yields dropped from 5.40% at the end of 2023 to 4.37% at the end of 2024. But due to the economy’s strength, the Federal Reserve eased interest rates more gradually than expected. This development combined with inflationary concerns drove 10-year Treasury yields higher. For the year, yields rose 70 basis points to end 2024 at 4.58% and the yield curve returned to a normal upward slope. Against this backdrop, the Bloomberg US Aggregate Bond Index, which declined 1.64% in December, added a below recent years’ average of 1.25% for the year while US Corporate high yield bonds were up 8.19% and 1-3 month Treasury Bills gained 5.32%.
Focused sustainable long-term funds registered an average total return decline of -3.25% in December and an average increase of 8.60%, or 13.6% on an asset weighted basis, for the full year 2024
On a combined basis, focused sustainable long-term mutual funds and ETFs, a total of 1,383 mutual funds/share classes as well as ETFs with total net assets $353.3 billion, registered an average total return decline of -3.25% in December and an average increase of 8.60% for the full year 2024. Reflecting the dominance of large cap growth and blended sustainable funds, on an asset weighted basis the average results for 2024 were much higher at 13.6%.
Of 71 investment categories, only seven sustainable fund investment categories posted positive average returns in December while, for the full year, 59 fund investment categories delivered positive results. Positive results ranged from a low average of 0.2% returned by the small Utilities fund category to an average high of 21.4% delivered by Large Growth funds, followed by 21% posed by Large Blend funds. These two fund categories combined ended the year with $182.6 billion in net assets, or just over 50% of the focused sustainable funds segment, and account for the lift when overall performance is calculated on an asset weighted basis. Negative average results posted in 2024 by the remaining 11 fund categories, which represent just 3.5% of long-term focused sustainable fund assets, ranged from a low of -50.52% to -0.07%.
Except for the performance of one small thematic fund, the next ten best performing funds in 2024, a combination of six mutual funds and four ETFs, consist of large growth and blended funds that produced an average return of 29.6% across a range from 26.68% to 34.05%. Top performers, which in the case of mutual funds reflects the performance of the lowest cost share class, included the Xtrackers S&P 500 Growth ESG ETF, up 34.05%, Praxis Growth Index I, up 33.44% and the iShares ESG Aware MSCI USA Growth ETF that advanced 32.89%. The performance of these funds, as well as the other seven performance leading funds, were boosted by their holdings of Magnificent Seven stocks. The Magnificent Seven made significant but varying contributions to the performance of the top ten large cap growth and blended funds, depending on levels of exposure. That said, all ten funds had some level of exposure to one or more Magnificent Seven stocks.
A selection of ESG Leaders indices failed to outperform conventional benchmarks in December but results for 2024 were less lopsided
A selection of five US and international equity ESG Leaders indices and one fixed income benchmark, for a total of six benchmarks constructed by MSCI around ESG screening and exclusionary criteria, failed to outperform their conventional counterparts in December. The five US and international equity-oriented ESG Leaders indices, including the MSCI USA ESG Leaders Index, the MSCI USA Small Cap ESG Leaders Index, the MSCI ACWI ex USA ESG Leaders Index, the MSCI EAFTE ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index, trailed by between 8 basis points (bps) and 96 basis points in December. At the same time, the Bloomberg MSCI US Aggregate ESG Focus Index came in even with its Bloomberg US Aggregate Bond Index counterpart.
Results for the entire year 2024 were not as lopsided but still leaning to underperformance. Two international indices outperformed, with the MSCI Emerging Markets ESG Leaders Index gaining 20.75% versus 14.68% for its conventional counterpart, for a 6.07% spread—the second widest spread in the last ten years. The performance of emerging markets also boosted the performance of the MSCI ACWI ex USA ESG Leaders Index. At the same time, the other four indices underperformed in 2024 relative to their conventional counterparts by a relatively small .02% for the Bloomberg MSCI US Aggregate ESG Focus Index to a wider deficit of 2.56% registered by the MSCI USA Small Cap ESG Leaders Index.
Average total return performance of focused sustainable long-term fund investment categories to December 2024
Fund Company-Investment Category
# Funds/Share Classes
Average of Expense Ratios
Net Assets ($MM)
Average 1-Month Total Return (%)
Average 12-Month Total Return (%)
Large Growth
62
0.83
32,773.9
-2.54
21.39
Large Blend
172
0.76
149,803.9
-2.83
20.97
Derivative Income
2
0.61
5.2
2.14
20.58
Target-Date 2065+
31
0.65
15.6
-3.67
14.72
Target-Date 2060
20
0.70
80.7
-3.81
14.45
Target-Date 2055
20
0.70
156.3
-3.74
14.25
Target-Date 2050
20
0.70
240.2
-3.67
13.95
Target-Date 2045
20
0.70
298.2
-3.57
13.55
Large Value
34
0.65
9,503.2
-6.19
12.71
Target-Date 2040
20
0.70
363.2
-3.43
12.54
Aggressive Allocation
4
1.00
346.2
-3.27
12.51
Mid-Cap Blend
29
0.86
7,317.6
-7.26
12.33
Global Large-Stock Value
9
1.16
530.6
-4.43
12.23
Moderate Allocation
54
0.98
9,268.8
-3.03
11.39
India Equity
5
1.29
390.8
-2.94
11.00
Global Large-Stock Blend
60
0.79
15,376.1
-3.95
10.94
Moderately Aggressive Allocation
4
0.73
868.0
-2.87
10.86
Target-Date 2035
20
0.69
344.5
-3.19
10.79
Global Large-Stock Growth
58
1.04
3,853.3
-4.39
9.14
Small Value
1
0.34
475.4
-7.56
9.06
Mid-Cap Value
2
0.23
359.9
-7.29
9.00
Small Blend
21
0.98
8,441.7
-7.11
8.80
Target-Date 2030
20
0.68
364.9
-2.83
8.70
Foreign Large Value
7
1.18
171.7
-2.85
8.61
Mid-Cap Growth
18
0.96
5,139.8
-6.60
8.53
Bank Loan
9
1.60
2,589.5
0.72
7.99
Real Estate
2
0.55
16.9
-7.04
7.98
Nontraditional Bond
7
0.85
652.4
0.11
7.52
Target-Date 2025
17
0.74
351.6
-2.61
7.35
High Yield Bond
30
0.77
2,988.2
-0.42
6.93
Target-Date 2020
9
0.59
6.9
-2.59
6.66
Global Allocation
4
0.78
139.0
-3.19
6.39
Moderately Conservative Allocation
7
0.78
273.9
-2.19
6.25
Diversified Emerging Mkts
53
1.03
8,649.0
-1.26
5.94
Target-Date 2015
9
0.58
5.4
-2.24
5.79
Consumer Defensive
1
0.76
5.8
-3.84
5.56
Ultrashort Bond
15
0.39
1,456.3
0.40
5.47
Target-Date Retirement
19
0.67
219.0
-2.04
5.42
Multisector Bond
6
1.29
331.3
-0.66
5.26
Short-Term Bond
22
0.67
4,115.2
0.04
4.76
Target-Date 2000-2010
8
0.58
1.1
-1.89
4.63
Foreign Large Blend
80
0.80
27,392.4
-3.05
4.32
Global Bond
6
0.71
163.8
-0.22
4.07
Small Growth
6
1.15
379.5
-6.92
4.03
Muni National Short
1
0.20
18.1
0.09
3.30
Global Bond-USD Hedged
17
0.53
1,644.4
-1.12
3.21
Miscellaneous Fixed Income
2
0.00
611.3
-1.84
3.11
Corporate Bond
15
0.72
3,196.6
-1.42
3.10
Natural Resources
22
0.99
6,045.4
-7.21
2.45
Muni National Long
10
0.66
284.6
-1.62
2.30
Intermediate Core-Plus Bond
61
0.73
7,615.4
-1.69
2.26
Intermediate Core Bond
49
0.56
21,138.1
-1.53
1.71
Muni National Interm
25
0.67
1,190.1
-1.10
1.59
Muni California Intermediate
3
0.62
199.0
-1.18
1.58
Intermediate Government
10
1.26
1,288.5
-1.58
1.07
Global Real Estate
3
0.38
427.7
-6.75
0.60
Industrials
5
0.58
882.8
-3.54
0.28
China Region
1
0.79
46.7
3.61
0.20
Utilities
2
0.81
43.2
-6.43
0.19
Foreign Large Growth
13
1.01
1,917.7
-3.65
-0.07
Infrastructure
19
0.82
2,605.8
-6.49
-0.41
Global Small/Mid Stock
42
1.10
1,838.7
-6.32
-1.39
Foreign Small/Mid Growth
4
1.38
331.9
-3.99
-1.76
Technology
9
1.18
141.0
-2.91
-2.01
Emerging-Markets Local-Currency Bond
5
1.19
10.7
-3.33
-3.75
Health
5
1.44
1,303.3
-8.39
-6.85
Equity Energy
6
0.59
200.9
-7.91
-10.61
Commodities Focused
7
0.71
367.4
-0.49
-10.88
Commodities Broad Basket
1
0.34
2.2
-2.13
-13.52
Miscellaneous Sector
22
0.73
3,682.4
-7.34
-15.89
Trading–Leveraged Equity
1
0.98
4.9
-0.10
-50.52
Totals/Averages
1,383
0.81
353,265.7
-3.25
8.60
Notes of Explanation: Performance represents the average return for the category over the noted time interval. Categories are listed in order of 12-month average total return performance posted to December 2024. Funds include mutual funds and ETFs. Sources: Morningstar Direct and Sustainable Research and Analysis LLC
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