Kip 25

Kiplinger 25: Our Green Fund Sees Some Red

But it has delivered over the long term since its 2012 inception.

Investors in sustainable mutual funds seek two kinds of green: market-beating returns generated by en­vironmentally friendly investments. That’s not an easy proposition, but lately bond investors have been having their kale and eating it, too. The bond market in March saw a swift 3.8% decline in the Bloomberg Barclays U.S. Aggregate Bond index. A version of the index tilted to maximize exposure to environmental, social and governance factors, meanwhile, held up a bit better, falling 3.6%, due in part to an avoidance of COVID-ravaged sectors such as energy.

TIAA-CREF Core Impact Bond (symbol, TSBRX), an ESG-focused fund and new member of the Kiplinger 25, didn’t fare as well. The fund lost 8.6% during the sell-off, partly because it held just 14% of assets in Treasuries and U.S. agency bonds, the best bond sectors this year. By contrast, Treasuries make up 40% of the fund’s benchmark, the Agg index.

Even so, Core Impact has delivered over the long term. Since its 2012 inception, its 3.4% annualized return has beaten its bogey and its average peer—a group that includes intermediate-term, core-plus bond funds, which can stray from the asset mix of traditional core bond funds. (Funds meant to mimic the holdings of the Aggregate index are said to be “core” funds.)

Core Impact has a green tint. Some 60% of the fund’s assets are invested in bonds issued by companies or entities that score in the top half of their peer group on en­vironmental, social and corporate governance criteria. The remainder of the portfolio is invested in so-called “impact” projects aimed at sustainable goals, such as preserving natural resources and creating renewable energy.

Since the sell-off, some bond sectors have rebounded, thanks to the Federal Reserve’s promised support. But lead manager Stephen Liberatore says, “I have a feeling that things have gone too far, too fast.” He’s selling corporate bond holdings that have rallied and buying more agency-issued mortgage-backed securities. “We’re making the portfolio more defensive,” he says. The fund has recovered some, too. Since the market bottom in March, both the fund and the Agg index have gained 5.2%.

Most Popular

Dying Careers You May Want to Steer Clear Of
careers

Dying Careers You May Want to Steer Clear Of

It’s tough to change, but your job could depend on it. Be flexible in your career goals – and talk with your kids about their own aspirations, because…
September 13, 2021
5 Top Dividend Aristocrats to Beef Up Your Portfolio
dividend stocks

5 Top Dividend Aristocrats to Beef Up Your Portfolio

The 65-member Dividend Aristocrats are among the market's best sources of reliable, predictable income. But these five stand out as truly elite.
September 14, 2021
7 Best Commodity Stocks to Play the Coming Boom
commodities

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021

Recommended

ETFs and Mutual Funds with Todd Rosenbluth
Index Funds

ETFs and Mutual Funds with Todd Rosenbluth

Which is better: ETFs or mutual funds? And how do you decide where to put your investments? CFRA fund expert Todd Rosenbluth has some answers. Also, h…
September 22, 2021
These 2 Emotional Biases Could Kill Your Retirement
Investor Psychology

These 2 Emotional Biases Could Kill Your Retirement

Are your emotions sabotaging your retirement plans? Some basic knowledge and careful introspection can go a long way toward avoiding major pitfalls.
September 20, 2021
Investment Strategies for the 4 Stages of the Economic Cycle
Markets

Investment Strategies for the 4 Stages of the Economic Cycle

The U.S. economy is cyclical in nature, surging ahead and pulling back in waves over time. Investors’ portfolios need to change with the rise and the …
September 19, 2021
Is a Target Date Fund Right for You?
investing

Is a Target Date Fund Right for You?

You're busy, and poring over investments is a pain. Wouldn't a target date fund be easier? Take a look at their pros and cons to see if incorporating …
September 14, 2021