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Sustainable investment funds performance wrap-up: October 2024
October was a volatile month that ended as it began for large cap stocks, down about 1%. Following early jitters linked to the escalating situation in the Middle East, investor sentiment shifted in response to a strong jobs report that eventually produced a month-to-date gain of 1.8% as of the close on October 18th. By…
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The Bottom Line: After a run of five consecutive monthly gains, the performance of stocks, bonds and focused sustainable mutual funds and ETFs recorded declines.
Stocks as well as bonds declined in October following five consecutive monthly gains
October was a volatile month that ended as it began for large cap stocks, down about 1%. Following early jitters linked to the escalating situation in the Middle East, investor sentiment shifted in response to a strong jobs report that eventually produced a month-to-date gain of 1.8% as of the close on October 18th. By the end of the month, however, these gains were erased due to a mixed bag of quarterly earnings results from Magnificent 7 companies Alphabet (GOOG)(GOOGL), Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), and Amazon (AMZN) that hit share prices and turned the Nasdaq 100 negative. While the tech laden index was down -0.82% for the month, it still managed to record a 39.19% gain over the trailing twelve months.
In addition to uncertainty that was also heightened by the upcoming US election and the potential implications of a policy shift on inflation and interest rates, new data released toward month-end suggested a continued deterioration in the labor market, an economy that was still chugging along, and an inflation situation that may not be completely out of the woods yet. Still, these developments seemed to keep the Fed on track to deliver another interest rate cut at the next Fed meeting taking place November 6th to 7th.
For the month, the benchmark S&P 500 fell over 0.91% on a total return basis, reversing course following five consecutive monthly gains. For the year-to-date interval and trailing twelve months, the index recorded strong gains of 20.97% and 38.02%, respectively. The Dow Jones Industrial Average gave up 1.26% in October and it also fell behind the S&P 500 for the year-to-date period as well as trailing 12-months with lower gains of 12.5% and 28.85%, respectively. Growth stocks outperformed their value counterparts but fell 1.8% on the month. Financials (2.7%), communications services (1.9%) and energy 0.8%) produced the only gains while health care (-4.6%), materials (-3.5%) and real estate (-3.3%) recorded the largest sector drops. Small caps retraced by 2.7%, as slowing economic momentum continued to weigh on the segment.
Foreign markets also experienced declines, giving up 4.91%
Foreign markets, as measured by the MSCI ACWI ex US Index, declined 4.91% while emerging markets, as calculated by the MSCI Emerging Markets Index, gave up 4.45%, pressured by a strong US dollar (USD), profit taking in India and volatility in Chinese equity indexes due to uncertainty over the efficacy of the support measures announced in September. Year-to-date and trailing 12-month results were 8.61%, 24.33%, 11.66% and 25.32%, respectively.
Bonds registered a significant drop of 2.48%, also following a run of five consecutive monthly gains
A run of five consecutive monthly gains was also halted for bonds, as the Bloomberg US Aggregate Bond Index recorded a significant drop of 2.48% in October. The Federal Reserve’s larger than expected 50 basis points (bps) rate cut in September, the first interest rate cut in four years, set the new target rate range at 4.75% to 5.00%. 3-month Treasury bill yields dropped from 4.90% on September 17th to 4.64% as of October 31st. while 10-year Treasury yields shifted higher, gaining 16 bps from 3.6% to 3.81% on September 30th and 63 bps by the end of October–perhaps indicating that investors may be concerned about rising government debt levels and the possibility of higher inflation ahead. In advance of the upcoming election and the Federal Reserve’s November meeting, 111 economists surveyed in a Reuters poll predicted that the Federal Reserve would cut its key interest rate by 25 bps November 7 and more than 90% predict another quarter-percentage point move in December.
Focused sustainable funds, including mutual funds and ETFs, declined by an average 2.63% in October, but continued to carry strong gains year-to-date and trailing twelve-months
Focused sustainable mutual funds and ETFs, a total of 1,409 funds in existence at the end of October, registered an average decline of 2.63% while long-term funds only (excluding money market funds), were down 2.64%. Year-to-date and over the trailing twelve months, average returns were 8.97% and 23.45%, respectively. Long-term mutual funds outperformed ETFs only, posting average returns of -2.55% and -3.11%, respectively, due in large part to their varying exposures/profiles. Sustainable US equity funds gave up an average of 1.63% while the results achieved by international equity funds were even worse, down an average of 4.23%. Bond funds suffered a significant decline that was just two basis points behind US equity funds, recording an average decline of 1.61%. Year-to-date the three categories recorded gains of 15.28%, 8.85% and 3.58%, respectively. Over the trailing twelve months, average results were 33.68%, 25.28% and 11.0%, respectively.
Returns across the universe of sustainable funds were largely negative, with only 62 funds/share classes and ETFs, or 4.4%, registering positive monthly return. Among fund categories, only four managed to eke out average positive results. These included Bank Loan funds, Prime Money Market funds, Ultrashort bond funds and Municipal National Short funds.
Individual fund returns ranged from a high of 6.89% to a low of -15.90%, with both funds tracking climate-related thematic mandates
At the fund level, the highest and lowest fund returns in October were bracketed by thematic funds focused on achieving positive environmental outcomes. At the high end of the range was the 6.89% return achieved by the $1.4 million Ninety One Global Environmental Fund I (NA) managed by Ninety One North America, Inc. The fund’s mandate was to invest in environmental companies that seek to contribute to positive environmental change while also integrating ESG risk considerations into investment decision making, however, this small fund announced that it was liquidating at the end of October—thus illustrating the risk of continuing to invest in a small fund that fails to achieve breakeven after 2 to 3 years, especially one that’s offered by a sponsor without deep pockets. At the other end of the range is the $34.2 million Global Hydrogen ETF (HYDR) that recorded a drop of 15.90% and is also down an average annual 1.57% for the three year period ending in October.
A selection of five US and international equity ESG Leaders indices and one fixed income benchmark turned in the worst relative performance results so far this year
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, turned in the worst relative monthly performance results so far this year. All five equity-oriented ESG Leaders indices trailed their conventional counterparts in October, lagging by range from 6 bps recorded by the MSCI Emerging Markets ESG Leaders Index to a high of 115 bps registered by the MSCI EAFE ESG Leaders Index. A contributing factor was the outperformance of the energy sector and the underperformance of the technology sectors. At the same time, the Bloomberg MSCI US Aggregate ESG Focus Index delivered a return equivalent to its conventional counterpart.
Beyond the one-month results and continuing to 12-months, relative performance results improved, with up to 50% of the equity indices outperforming while the ESG fixed income benchmark lagged by the smallest of margins over the 3-month, year-to-date and 12-month intervals.
Over the intermediate and long-term time frames, relative performance results through October are mixed. Equity and fixed income ESG indices lagged their conventional benchmarks over the three-year period. Over the previous five years, only two indices outperformed. At the same time, four of the five (the track record of fixed income securities doesn’t extend to 10-years) ESG indices outperformed their conventional benchmarks while US large and mid-cap stocks underperformed. That said, the ten 10-year track record attributed to ESG indices is questionable in the light of significant operational and definitional changes that time interval. 3-year and -year proxies may be better indicators.
Average total return performance of focused sustainable fund categories to October 31, 2024
Investment Company
# of Funds/Share Classes
Net Assets ($MM)
1-M (TR %)
Y-T-D (TR%)
12-M (TR%)
Bank Loan
9
2,588.8
0.48
6.45
9.45
Prime Money Market
5
4,063.5
0.38
4.17
5.04
Ultrashort Bond
15
1,520.6
0.27
4.62
5.99
Muni National Short
1
17.7
0.09
2.82
4.17
Derivative Income
2
5.3
-0.09
13.64
20.95
Global Real Estate
7
434.8
-0.29
10.79
31.12
Nontraditional Bond
7
601.5
-0.54
6.47
11.34
High Yield Bond
30
2,909.9
-0.65
6.34
15.24
Short-Term Bond
22
4,009.2
-0.67
4.15
7.57
Global Bond
15
182.4
-0.86
3.28
8.75
Muni California Intermediate
3
198.6
-1.18
1.48
7.97
Multisector Bond
7
383.8
-1.20
5.11
11.42
Small Growth
3
346.1
-1.25
-3.30
15.32
Commodities Focused
8
566.5
-1.28
-7.90
-8.15
Muni National Intermediate
25
1,176.4
-1.39
1.33
9.05
Large Value
33
9,686.7
-1.46
13.53
30.01
Muni National Long
10
284.0
-1.52
2.20
12.92
Large Blend
178
147,604.5
-1.53
17.52
35.16
Global Bond-USD Hedged
8
1,575.4
-1.57
2.40
9.88
Large Growth
64
33,608.4
-1.60
17.85
36.47
Small Value
1
469.7
-1.62
6.99
31.53
Mid-Cap Blend
32
7,646.8
-1.65
12.75
32.59
Small Blend
21
8,310.2
-1.71
7.29
27.54
Miscellaneous Fixed Income
2
594.1
-1.84
3.32
15.01
Moderately Aggressive Allocation
4
889.7
-2.00
9.88
22.67
Corporate Bond
16
3,145.9
-2.07
3.31
13.00
Moderate Allocation
53
9,046.9
-2.09
11.08
24.32
Target-Date Retirement
19
218.7
-2.13
5.66
15.41
Target-Date 2000-2010
8
1.1
-2.19
5.08
14.37
Health
7
1,477.2
-2.25
-0.60
18.56
Target-Date 2015
9
5.9
-2.32
6.20
16.81
Intermediate Core Bond
56
21,389.8
-2.36
2.19
10.43
Target-Date 2025
17
330.7
-2.37
7.61
19.33
Intermediate Core-Plus Bond
56
8,173.0
-2.45
2.98
12.07
Mid-Cap Growth
23
5,303.8
-2.47
7.32
29.85
Target-Date 2030
20
358.4
-2.47
8.84
21.67
Target-Date 2035
20
342.2
-2.48
10.75
25.04
Moderately Conservative Allocation
7
277.7
-2.48
6.20
17.76
Target-Date 2040
20
340.6
-2.50
12.42
27.90
Target-Date 2020
9
7.7
-2.52
7.05
19.04
Target-Date 2045
20
286.6
-2.53
13.36
29.54
Target-Date 2050
20
226.0
-2.56
13.77
30.42
Target-Date 2060
20
75.8
-2.58
14.27
31.56
Target-Date 2055
20
147.9
-2.59
14.05
31.09
Target-Date 2065+
31
13.0
-2.61
14.52
32.01
Aggressive Allocation
4
346.4
-2.74
11.81
28.02
Global Large-Stock Value
9
547.3
-2.79
14.59
27.83
Global Allocation
4
142.9
-2.87
6.55
20.13
Intermediate Government
9
1,059.2
-2.96
1.27
10.99
Global Large-Stock Blend
65
12,928.3
-3.01
11.29
28.84
Real Estate
2
17.1
-3.22
11.14
31.90
Mid-Cap Value
2
370.5
-3.28
11.21
29.30
Diversified Emerging Mkts
53
8,713.7
-3.58
10.43
23.29
Emerging-Markets Local-Currency Bd
5
16.1
-3.66
0.58
10.73
Global Large-Stock Growth
57
4,644.0
-3.74
11.14
29.13
Technology
9
135.0
-3.83
-5.68
18.91
Natural Resources
22
6,358.0
-3.88
7.13
23.28
Foreign Large Value
7
170.0
-4.15
11.37
25.74
Utilities
2
48.6
-4.41
4.63
19.42
Industrials
5
896.9
-4.49
1.33
17.11
Commodities Broad Basket
1
2.3
-4.54
-10.85
-8.24
Consumer Defensive
1
5.8
-4.56
5.13
18.41
Global Small/Mid Stock
31
1,811.7
-5.15
1.09
21.40
Foreign Large Blend
78
28,002.7
-5.33
7.41
23.47
Infrastructure
19
2,473.3
-5.36
4.37
22.00
India Equity
5
396.7
-5.37
12.65
23.82
Foreign Large Growth
15
2,089.6
-5.66
4.61
22.79
Equity Energy
12
337.5
-5.93
-1.60
11.57
China Region
1
54.0
-6.00
1.86
1.09
Foreign Small/Mid Growth
4
351.4
-7.26
0.34
20.80
Miscellaneous Sector
23
4,574.3
-7.42
-7.65
9.84
Trading–Leveraged Equity
1
4.8
-15.02
-60.11
-48.88
Totals/Averages
1,409
357,341.6
-2.63
8.97
23.45
Notes of Explanation: Average annual total returns to October 31, 2024. Sources: Morningstar Direct and Sustainable Research and Analysis LLC.
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