FAQs
What is the rationale for socially responsible or values based investing?
By investing in a company, one becomes a part owner in that company. The investor shares in the profits of the company (through dividends) and also benefits from the company’s growth. Eventide Funds are an opportunity for those who want to invest in companies that create value for their customers (and the world in general), and for those who want to avoid investing in companies whose profits are made through unethical or unsustainable means.
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Doesn't a values-based investment approach limit potential returns?
There is a prevailing belief among investors that ethical considerations will limit the performance of mutual funds, causing them to lag behind other actively managed funds. This sentiment is common, but also unfounded. There is substantial evidence amassing that suggests values-based screening enhances portfolio performance. For example, Domini 400* which is a screened index fund has outperformed the S&P 500** by 0.82% annualized over 20 years, from May 1, 1990 to March 31, 2010. More evidence can be seen in the Credit Suisse Most Admired Portfolio†, which has offered a performance advantage over the S&P 100** benchmark by 3.3% annualized since 1983. Of course, past performance does not guarantee future results.
What types of companies does Eventide Funds invest into?
Eventide analyzes the performance of potential investments not only for financial strengths and outlook, but also for the company’s ability to operate with integrity and create value for customers, shareholders and society. While few companies may reach these ideals in every area of their business, these principles articulate Eventide’s highest expectations for corporate behavior. Eventide seeks to invest in companies that reflect the following values:
- Respecting the value and freedom of all people; this includes the right to life at all stages and freedom from addictive behaviors caused by gambling, pornography, tobacco and alcohol.
- Demonstrating a concern for justice and peace through fair and ethical relationships with customers, suppliers and business partners and through avoidance of products and services that promote weapons production and proliferation.
- Promoting family and community; this includes protecting children from violent forms of entertainment and also includes serving low income communities.
- Exhibiting responsible management practices, including fair-dealing with employees, communities, competitors, suppliers and customers as demonstrated by a company’s record regarding litigation, regulatory actions against the company and its record of promoting products and services that improve the lives of people.
- Practicing environmental stewardship.
Why does Eventide use a semiquantitative approach to investing?
Eventide believes in employing a quantitative approach to maintain the discipline that has historically led to a consistent outperformance of the S&P 500**. Computational algorithms detect variances and outliers in large complex data sets far better than humans. After an initial quantitative screen, the portfolio manager will use his judgment as a second screen, so as to include sound human judgment on the quantitative output.
What do you gain from the Masters' Select component of your investment process?
No one source of knowledge is infallible. The collective intelligence of many proven sources of knowledge can mitigate the risk of any one source dramatically failing. Eventide believes in diversification in many regards, not just portfolio allocation.
Is Eventide's past performance sustainable?
Past performance does not guarantee future performance. Our strategy and investment process is engineered and intended to outperform the market in many different market environments, and our goal is to use past performance as a guide for sustainable performance. Different investment styles (e.g., value vs. growth) perform better in different periods. Eventide overweights different styles depending on current market conditions.
How do you monitor risk? What risk management policies or controls do you have in place?
Many investors think that they are diversified when they are not, i.e. they have non-diversifiable risk. It is possible to look for companies with truly diversifiable risk that is not tied to GDP††. Eventide takes a more detailed approach to diversification, seeking to ensure that the companies in which it invests are in industries or companies with risks that are not correlated with each other or with the broad market.
*Launched in May 1990, the Domini 400 is the first benchmark index constructed using environmental, social and governance (ESG) factors. It is a widely recognized benchmark for measuring the impact of social and environmental screening on investment portfolios. The index is designed to reflect the way social investors select companies. Normally, about half the S&P 500 companies (250 stocks) are also constituents in the Domini 400. From May 1, 1990 to March 31, 2010, the Domini 400 has outperformed the S&P 500 by 0.82% annualized (9.65% compared to 8.83%).
†The Credit Suisse Most Admired Portfolio examines the alpha-generating characteristics of a strategy based on Fortune magazine's yearly Most Admired Companies list. Fortune has published its Top 10 list of most admired companies annually since 1983. Investing in these companies has offered a performance advantage over the S&P 100 benchmark. The strategy uses the past five Most Admired Companies lists to construct the current portfolio. Companies are assigned 2% of the current portfolio for each appearance in the Top 10 list over the past five years. In dollar terms, the most admired companies strategy produced over twice the return of the S&P 100 from 1983-2009. An investment of $100 in 1983 in the portfolio would have grown to $2,544 by 2009 versus $1,153 in the S&P 100. The strategy's annualized return was 3.3% greater than that of the S&P 100 during this period.
**S&P 500 is an index of the 500 American stocks with the largest market capitalization and S&P 100 is an index of the 100 American stocks with the largest market capitalization. Both are created by Standard & Poor's Corp and considered to represent the performance of the stock market generally. Neither is an investment product available for purchase.
††GDP, gross domestic product, is a measure of a country’s overall economic output.