WHAT ARE WE LOOKING FOR?
How socially responsible (SR) stock funds have fared in the market recovery since the spring of 2009.
SR funds use social and/or environmental screens to pick stocks, but they can differ widely. Some may avoid firms investing in areas like tobacco, alcohol or gambling. Others may look for firms with strong environmental records.
TODAY'S SEARCH
We asked Globe Investor analyst Victor Tan to screen most of the stock funds tracked by the Toronto-based Social Investment Organization (SIO), and then also added iShares Jantzi Social Index exchange-traded fund (ETF) to the mix. Pooled, segregated and retail venture capital funds were excluded from the SIO's list. We looked at the one-year and average annual returns over three years to April 30.
WHAT DID WE FIND
Canadian SR stock funds led the pack over one year.
Investors Summa SRI Fund, rose to the top of the heap with a 37.9-per-cent gain. On that upbeat note, however, its two managers, Daniel McClure and Keith McLean, last month resigned after a 10-year stint with Investors Group to join GMP Investment Management.
Dom Grestroni, who heads up Investor Group's North American equity group and who is now interim manager, said there hasn't been any drastic changes to the portfolio since their departure.
The Summa fund, which lost nearly 50 per cent in 2008, had a rough ride when the market collapsed later that year because of its investment [now at 21 per cent]in foreign or mostly U.S. stocks, and the impact from currency conversion, he said.
"The big bounce-back in returns was primarily from the same holdings that went down and produced the big decline in 2008," he said. The technology sector did well during the snap-back, and the fund benefited from holding names like Apple, Research In Motion, Google and Cisco.
Among the Canadian stock funds, three use the services of Jantzi-Sustainalytics, which provides environmental, social and governance analysis of stocks. RBC Jantzi Canadian Equity gained 32.4 per cent followed by iShares CDN Jantzi Social Index with a 30.8-per-cent return and Meritas Jantzi Social Index, up 28.3 per cent.
Unlike its two passively run peers, the RBC Jantzi Canadian Equity is an actively managed fund. "Our fund is generally more diversified across names [about 80]and sectors" than the Jantzi Social Index of 60 companies, said Paul Mayhew, vice-president of research and product development for RBC Global Asset Management. For instance, the index had a 9-per-cent weighting in Toronto-Dominion Bank at March 31, while the RBC fund had only 5 per cent in that stock.
Over three years, all funds with that history were still showing red ink with one exception. Desjardins Environment was the loner in positive territory with an average annual return of 2.4 per cent.