Amid ESG Fund Proliferation, Advisors Must Be Mindful of Fit

Posted by Dana Funds Investment Team on Jul 9, 2020 11:12:14 AM

ESG interest is growing and as asset flows follow, so too are the number of strategies dedicated to the space. For investment advisors, that makes the job of matching client objectives with the right strategy increasingly difficult.

In a recent Q&A session, Dana portfolio managers touched on the issue, and where their own ESG fund may – or may not – fit within a portfolio. A brief excerpt from the interview explains:

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Style Boxes Pose Pitfalls in Post-Pandemic Investment Landscape

Posted by Dana Funds Investment Team on Jun 3, 2020 3:50:36 PM

Growth or value? It’s a question advisors and allocators ponder at every potential turning point in the market cycle. But as the world emerges from a pandemic-induced lockdown, the new investment environment may favor neither.

Instead, we believe heavy tilts toward either style box could punish investors in the coming quarters. Here’s the short case for why:

Scarcity of Growth Has Created a Crowding Effect Among Growth Stocks

So far this year, growth has outperformed value substantially. If the Russell 1000 Growth and Russell 1000 Value Index ended the year where they were at in mid-May, the growth index would have outperformed its value counterpart by the widest level in any year since 1999.¹

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Explaining the Disconnect Between Stocks and the Economy

Posted by Dana Funds Investment Team on May 27, 2020 4:34:57 PM

In recent conversations with clients, we are getting fewer questions about our economic outlook. Many of our clients are themselves business owners and have already felt the pandemic’s economic pinch firsthand. They don’t need investors to explain the fear gripping Main Street. What puzzles them is how the stock market could be so at odds with the economic gloom.

While entire industries are on the sideline during the pandemic and the unemployment rate continues to climb, stocks have recovered much (though not all) of March’s losses. So, what’s behind the rally that seems so out of sync? In short, we think the market is confident about the safety net the Fed and the government has provided. Given the size and scope of that safety net, markets are already looking ahead to when the quarantine ends.

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Top-Heavy & Troubling: S&P 500 Bears Extreme Concentration Risk

Posted by Dana Funds Investment Team on May 21, 2020 11:10:00 AM

The S&P 500 bears an extreme risk: too few stocks account for too much of its weight. The index is experiencing extreme concentration risk not seen in the last 30 years, with its five largest stocks now accounting for more than 20% of the entire index.

The chart below shows just how out of balance the weightings of the largest S&P 500 stocks have become. Currently, the total index weight of the five largest holdings is more than five standard deviations1 above normal.

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Clearing Up the ABCs of ESG

Posted by Dana Funds Investment Team on May 7, 2020 5:33:28 PM

While ESG interest is undoubtedly on the rise, the category hasn’t reached its full growth potential. One issue potentially holding it back? Clarity.

An October 2019 report from the Institute of International Finance1 found that financial firms are using nearly 80 different terms to describe various forms of sustainable investing. As the report describes, this is creating confusion for would-be investors:

“At best, this confusion makes it hard to compare investment products and for clients to understand the differences in offerings,” the report states. “At worst, it facilitates greenwashing—intentionally misleading investors or giving them a false impression about how well their investments are aligned with their sustainability goals.”

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ESG: For The Record

Posted by Dana Funds Investment Team on Nov 22, 2019 9:38:11 AM

On November 13th the Wall Street Journal published an article entitled “A Socially Responsible Strategy Can Be Tricky” that largely took to task Environmental, Social and Governance (ESG) investing.  Though the author rightly identifies the subjective, and at times confusing, nature of ESG criteria standards (something Dana has previously discussed), the majority of the article is a somewhat cynical view of ESG investing as a worthwhile economic endeavor.

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Do ESG Investors Believe In Unicorns?

Posted by Dana Funds Investment Team on Nov 6, 2019 4:35:40 PM

The once red-hot market for unicorn investments has turned chilly. These start-up enterprises with a value of at least $1 billion have enjoyed relative easy access to private capital this cycle. Robust growth, easy credit and a fair amount of hype combined to elevate the early valuations of these companies. Peloton Interactive, Inc. (PTON), the maker of stationary bikes and treadmills, marketed itself as “selling happiness.”  Ridesharing company, Lyft, Inc. (LYFT) claimed it was “at the forefront of societal change.” Corporate real estate leasing company WeWork aimed to “elevate the world’s consciousness.”  

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Q&A: ESG Investing

Posted by Dana Funds Investment Team on Nov 1, 2019 7:37:47 AM

The October issue of Citywire RIA Magazine has hit the newsstands and they released an RIA Supplement titled, “ESG’s Time Has Come.”  Environmental, social and governance (ESG) investing seems to be a hot topic recently, but many advisors are not up to date with the ins and outs of ESG investing. 

As part of the supplement, Dana submitted an article answering many questions that advisors have about ESG Investing.  Questions include:

  • What advice would you have for advisors who are looking to get into this space or deepen their ESG Investing toolkit?
  • ESG Strategies have become popular. Why is this?
  • What’s your approach to ESG Investing? How does it differ from competitors?
  • What funds do you offer? Are they all ESG funds?
  • How do you see the future of ESG playing out? Is it going to become more mainstream and just a regular part of how people invest?
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Defining Faith-Based Investing

Posted by Dana Funds Investment Team on Oct 23, 2019 4:19:49 PM

“Among us, who is above must be in service to others.  This doesn’t mean we have to wash each
other’s feet every day, but we must help one another.”
-Pope Francis

What do we want to accomplish with our time here on Earth?  What impact do we want to have on society?  How do we want to help shape the future for the generations that follow?  Mankind has asked itself these philosophical questions for ages. Their emerging importance in the form of environment, social and governance (ESG) investing or sustainable, responsible and impact (SRI) investing is a relatively more recent phenomenon.

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Faith-Based Investors Make an Impact

Posted by Dana Funds Investment Team on Oct 17, 2019 5:01:37 PM

Faith-based institutions continue to be leaders in the evolution and growth of Environmental, Social and Governance (ESG) investing. During September’s Financing The Future summit in South Africa, 22 religious group organizations announced their plans to divest oil, gas and coal investments, solidifying Faith-based investors’ position as the single largest constituency exiting fossil fuels1. While many ESG investing strategies utilize these exclusionary screening techniques to avoid investments in fossil fuels or sectors such as weapons, tobacco, alcohol and pornography, a group of Catholic faith-based investors are taking their ESG investment approach further by implementing and advocating a proactive approach to investment selection.

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The Dana Funds are distributed by Ultimus Fund Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC. and the firms referenced in this blog post.