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Sustainability Matters

Sustainable Large-Blend Options That Have Beaten the Best

These 24 funds have high sustainability ratings and have beaten the Vanguard 500 Index Fund over the last decade.

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Fund investors interested in incorporating sustainability into their portfolios face a problem virtually all investors have: It is hard to beat the market. Over the past decade,  Vanguard 500 Index (VFINX), the lowest-cost index fund widely available to retail investors and the largest mutual fund in the world, outperformed 82% of the funds in the large-blend Morningstar Category. Among those that beat Vanguard 500 Index were 16 other index funds that happened to edge it out, mostly from tracking different large-cap or total market indexes. That leaves only 42 actively managed large-blend funds, 13% of the category, that have beaten Vanguard 500 Index over the past 10 years (through August 2016).

As you might imagine, these are generally high-quality funds. Because the Morningstar Rating is a category-relative measure of risk-adjusted performance, it is not surprising that 33 of these funds have Morningstar Ratings of 4 or 5 stars. Those ratings, earned over a period that still includes the financial crisis, reflect performance under a variety of market conditions. Morningstar analysts cover and assign Morningstar Analyst Ratings to 18 of the 42, and all 18 receive Analyst Ratings of Gold, Silver, or Bronze. A Morningstar Medalist fund is one that our analysts believe will outperform its peer group and relevant benchmark over the coming years, based not only on past performance but also on a broad assessment of the fund’s management, investment process, resources, and cost. In sum, this group of 42--especially the 18 covered by Morningstar analysts--have proved themselves to be excellent core holdings over the past decade and can make a pretty good case for themselves being high-quality offerings going forward.

Jon Hale does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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