Jerry Dodson founded Parnassus Investments in 1984 as a responsible investing firm. Since then, Parnassus has grown to $26.5 billion in assets under management—more than twice that of the next-largest sustainability-focused asset manager—and has become an unequivocal leader in sustainable investing. The firm’s strong investment culture and disciplined approach distinguish it from peers, even those without sustainable investing mandates. In fact, of its four funds that receive Morningstar Analyst Ratings, three are Morningstar Medalists—including Silver-rated Parnassus Core Equity (PRBLX) and Parnassus Mid-Cap (PARMX)—signaling our conviction they will outperform their bogies over a full market cycle.
A Strong Investment Culture
From 1984 to 2001, Dodson was the sole manager for each of the firm’s funds, and he was initially the only listed manager for each fund it has since launched. But he has handed off much of his responsibility and is now a manager for just two. Still, he has kept the investment team lean at 13 members, consisting of nine managers; one analyst focused on fundamental research; and three analysts focused on environmental, social, and governance (or ESG) research. The team will also add two analysts this upcoming summer to bolster its fundamental research efforts. On the face of it, the number of analysts may seem small. The investment team’s modest size likely limits the breadth of its research, but it meets this challenge with significant collaboration among its managers, who run focused, low-turnover portfolios. In fact, the similarity among the January 2018 holdings of the firm’s four U.S. equity funds illustrates this combined effort, as shown in the table below. For example, the most similar portfolios are large-blend siblings Parnassus and Parnassus Core Equity, which have a common-holdings score of 40% (this metric accounts for both the number of stocks held in common and their respective portfolio weights).
Andrew Daniels, CFA, CMA does not own shares in any of the securities mentioned above.
Connor Young does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.