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Parnassus Mid-Cap: Compelling ESG Fund at a Reasonable Price

With a rigorous ESG process, reasonable costs, and good performance, this fund is one investors should keep their eyes on.


Wiley Green: It's hard not to notice Parnassus Mid-Cap lately. The managers, Lori Keith and Matthew Gershuny, were hand-picked by firm founder Jerome Dodson to run the fund in 2008. They've demonstrated exceptional stock-picking over the last five years, with a whopping stock selection effect of 14% in excess of the benchmark. It's concentrated, with around 40 holdings, and the team isn't afraid to over or underweight sectors--they've reliably carried a slug of industrials stocks and been light in real estate. But a hot performance record is no reason to invest, and it's reasonable to expect this fund to regress slightly in the future.

Better reasons to invest in this fund are the rigorous ESG process and reasonable costs. While some funds simply won't own known rotten eggs, Parnassus actively uncovers great companies through ESG research in five key areas. This process is as fundamental to portfolio construction as stock valuation, resulting in exceptional Morningstar Sustainability Ratings. Further, the firm's fees are competitive, and declining, across the board as assets increase; this fund's expense ratio has decreased by 30% over the past 10 years. As a compelling ESG fund at a reasonable price, we are keeping the Parnassus Mid-Cap fund on our radar.

Wiley Green does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.