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Sustainable investment funds performance wrap-up: September 2024
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The Bottom Line: Stocks staged a recovery in September to close at record levels while long-term sustainable funds posted an average gain of almost 2%.
After a volatile start to September, stocks staged a recovery to close at record levels
After a volatile start to September that saw the S&P 500 give up 4.2% during the first four trading days of the month, large cap stocks staged a recovery to close the month at a record level. For the month, the S&P 500 set five new closing highs and 43 closing highs year-to-date. Fueled by a sense of optimism that inflation was under control, the Federal Reserve’s 50 basis point (bps) interest rate cut will boost U.S. growth and avoid a recession, further powered at the end of the month by the announcement of a major injection of economic stimulus in China and positive expectations for corporate earnings in the third and fourth quarters, the S&P 500, which saw a broadening of stocks participating in the rally, closed the month and quarter with gains of 2.14% and 5.89%, respectively. Year-to-date, the benchmark is up by 22.08%. Other major indicators were up too. The Dow Jones Industrial Average gained 1.85%, adding 12.31% for the year and 26.3% across the trailing twelve months. At the same time, the Nasdaq 100, propelled by the performance of the Magnificent 7 that as a group, reversed the previous month’s decline, posted a gain of 2.6% in September, 20% year-to-date and a whopping 37.5% since October 1, 2023.
Consumer discretionary stocks led while energy lagged, declining 2.8%
Mid cap and small cap stocks recorded narrower gains of 0.98% and 0.67%, respectively, and logged increases of 12.2%, 7.9%, 24.8% and 23.5% year-to-date and over the trailing twelve months, respectively. For September, eight of 11 S&P 500 sectors increased, with Consumer Discretionary stocks leading, up 7.0%, while Energy did the worst, down 2.8% for the month. Energy was also the worst performing sector across midcap and small cap stocks. Large value stocks underperformed, but the reverse was true for mid cap and small cap stocks.
International stocks also recorded gains, led by China in response to stimulus announcements
China’s economic stimulus announcement drove Chinese stocks higher, delivering the best returns in September, up 23.9% according to the MSCI China Index and up 29.3% year-to-date. This development also impacted other world indices, elevating the MSCI ACWI, ex USA, up 2.7% and the MSCI Emerging Markets Index up 6.7%. MSCI EAFE was more subdued, generating a gain of 0.9%.
Bonds registered their fifth consecutive monthly gain in September
Bonds, as measured by the Bloomberg US Aggregate Bond Index, registered their fifth consecutive gain in September, adding 1.3% and further lifting their 12-month and year-to-date gains to 11.6% and 4.5%, respectively and putting them on track to beat last year’s 5.5% gain. High yield bonds did even better, adding 1.6% for the month and almost twice as well with an increase of 8% year-to-date. While ten year and two-year Treasury yields dropped by 10 bps and 2 bps, respectively during the month, yields shifted higher by 5 bps and 11 bps during the 8 trading days following in the Feds larger than expected 50 bps US Fed rate cut which took the Fed funds rate to a 4.75-5% range. For the first time this year, the inverted yield curve turned positive in early September ahead of the Fed’s rate action.
Long-term sustainable funds added an average 2% in September and 11.9% year-to-date
Focused long-term sustainable mutual funds and ETFs, 1,412 funds/share classes in total with net assets in the amount of $361.3 billion, added an average 2% in September, the fifth best monthly average results this year, and registered strong increases of 11.9% and 23% year-to-date and 12-months, respectively. Only a small number of funds/share classes, 23 in total or 1.6%, recorded negative rates of return in September. Results ranged from a high of 26.7% achieved by the KraneShares MSCI China Clean Tech ETF that benefited from the China run up, to a drop of 6.4% registered by the iPath Series B Carbon ETN. Sustainable international funds/share classes led with an average return of 2.3%, followed by US equity funds and taxable bond funds that added an average of 1.9% and 1.2%, respectively. Year-to-date, US equity funds led with an average gain of 17.2% while international funds and taxable fixed income funds gained 13.6% and 5.3%, respectively.
Selected ESG indices delivered mixed results in September and year-to-date
Sustainable securities market benchmarks, measured by a selected number of five MSCI ESG Leaders indices covering equities and one Bloomberg MSCI US Aggregate ESG Focus Index, reflected mixed results in September and year-to-date. Three indices, the MSCI USA ESG Leaders Index, the MSCI ACWI ex USA ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index outperformed their conventional benchmarks by 21 bps, 38 bps and 159 bps, respectively, with the international indices benefiting from a greater China weighting which was most pronounced for the narrower emerging markets index. At the same time, lower energy prices in September were likely a contributing performance factor.
Mixed results were also achieved on a year-to-date basis while over the trailing twelve months, relative results improved as four of the six ESG indices outperformed by a range as high as 3.6% recorded by the MSCI Emerging Markets ESG Leaders Index.
While mixed relative returns also show up in the three-year results, improved long-term relative outcomes are evident over the trailing five- and ten-year intervals, in particular due to the outperformance of international ESG Leaders indices.
Average total return performance of sustainable fund categories to September 30, 2024
Investment Category
# of Funds/
Share Classes
Net Assets ($M)
1-M (TR %)
Y-T-D (TR %)
12-M
(TR %)
Aggressive Allocation
4
359.3
1.78
14.95
27.15
Bank Loan
9
2692
0.67
5.94
8.44
China Region
1
60
26.71
8.37
0.27
Commodities Broad Basket
1
2.4
5.72
-6.61
-7.92
Commodities Focused
8
563.4
0.81
-6.64
-8.64
Consumer Defensive
1
6.1
3.18
10.15
15.07
Corporate Bond
16
3170.2
1.49
5.50
13.68
Derivative Income
2
5.4
1.25
13.74
20.46
Diversified Emerging Mkts
54
9095.4
5.43
14.48
23.15
Emerging-Markets Local-Currency Bond
5
15.8
2.51
4.41
14.03
Equity Energy
12
362.2
4.02
4.38
10.54
Foreign Large Blend
78
29487.2
0.89
13.44
25.82
Foreign Large Growth
17
2296.1
0.74
10.95
24.86
Foreign Large Value
7
162.8
0.51
16.19
29.42
Foreign Small/Mid Growth
4
381.4
1.68
8.19
23.70
Global Allocation
4
147.8
1.88
9.69
20.05
Global Bond
11
164
1.23
4.02
10.41
Global Bond-USD Hedged
8
1578.4
1.20
4.03
10.95
Global Large-Stock Blend
64
13338.1
2.17
14.74
27.65
Global Large-Stock Growth
55
4821.8
1.90
15.49
29.31
Global Large-Stock Value
9
565.9
1.13
17.88
27.25
Global Real Estate
7
448
3.35
13.20
31.62
Global Small/Mid Stock
31
1951.7
2.52
6.41
18.68
Health
7
1508.7
-1.20
1.74
10.90
High Yield Bond
30
2890.9
1.27
6.99
14.47
India Equity
5
419.2
2.51
19.05
27.52
Industrials
5
950.6
7.74
5.89
11.28
Infrastructure
19
2461.7
4.20
10.29
24.29
Intermediate Core Bond
47
20718.6
1.27
4.68
11.37
Intermediate Core-Plus Bond
67
8849
1.33
5.41
12.72
Intermediate Government
10
1260
1.15
4.37
11.52
Large Blend
178
149438.7
1.83
19.34
34.05
Large Growth
64
34429.5
1.87
19.75
35.41
Large Value
33
9968.2
1.63
15.20
27.86
Mid-Cap Blend
32
7827.1
2.24
14.65
27.86
Mid-Cap Growth
23
5574.6
1.98
10.03
24.30
Mid-Cap Value
2
377.6
2.06
14.97
27.50
Miscellaneous Fixed Income
2
601.2
1.41
5.25
14.64
Miscellaneous Sector
23
5223.2
5.31
-0.10
8.48
Moderate Allocation
53
9277.4
1.49
13.45
24.32
Moderately Aggressive Allocation
4
909.9
1.53
12.13
22.30
Moderately Conservative Allocation
7
287.1
1.51
8.91
18.04
Multisector Bond
7
379.8
1.13
6.39
11.61
Muni California Intermediate
3
201.8
0.80
2.69
8.44
Muni National Interm
30
1219.3
0.81
2.70
9.46
Muni National Long
10
289.5
1.12
3.77
12.94
Muni National Short
1
17
0.27
2.73
4.38
Natural Resources
22
6594.4
5.99
11.39
20.86
Nontraditional Bond
7
570.5
1.08
7.05
11.47
Real Estate
2
16.9
2.57
14.81
30.38
Short-Term Bond
26
4044.5
0.89
4.84
8.18
Small Blend
21
8474.5
1.63
9.16
21.70
Small Growth
3
333.2
1.98
-1.84
4.83
Small Value
1
477
0.17
8.76
25.90
Target-Date 2000-2010
8
1.1
1.46
7.44
15.06
Target-Date 2015
9
6.1
1.52
8.71
17.33
Target-Date 2020
9
8
1.64
9.83
19.44
Target-Date 2025
20
330.4
1.52
10.17
19.84
Target-Date 2030
20
356.1
1.61
11.58
22.16
Target-Date 2035
20
341.6
1.71
13.57
25.33
Target-Date 2040
20
339.5
1.79
15.30
28.03
Target-Date 2045
20
280.8
1.87
16.31
29.60
Target-Date 2050
20
224.1
1.90
16.76
30.45
Target-Date 2055
20
144.7
1.94
17.09
31.13
Target-Date 2060
20
73.5
1.94
17.30
31.62
Target-Date 2065+
28
12.9
1.94
17.59
32.00
Target-Date Retirement
19
215.9
1.38
7.97
16.19
Technology
9
146.1
2.00
-1.85
11.79
Trading–Leveraged Equity
1
5.7
22.05
-53.06
-64.02
Ultrashort Bond
15
1491.5
0.52
4.35
6.17
Utilities
2
54.7
2.84
8.78
20.08
Totals/Averages
1,412
361,299.7
1.98
11.87
22.94
Notes of Explanation: Average total returns to September 30, 2024. Sources: Morningstar Direct and Sustainable Research and Analysis LLC.
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