The RI FundGrade A+ Award is given annually to the best Responsible Investment funds in three broad categories: Equity; Balanced; and Fixed Income. Up to 10 years of risk-adjusted performance is considered for funds identified as Responsible Investment funds by the Responsible Investment Association (RIA).
The Sharpe, Information, and Sortino Ratios used to determine the Fundata RI FundGrade A+ score focus on different aspects of risk-adjusted performance, but all of them reflect an understanding that a comprehensive investment plan is more than a narrow focus on the highest returns. In the same way, the funds that are recipients of the RI FundGrade A+ Award recognize that success is measured both in terms of a positive impact on investor portfolios as well as a positive impact on the world around them.
RI Fixed Income Category
Meritas Income & Growth Portfolio
is the Fixed Income RI FundGrade A+ winner in 2015. The fund is a familiar name, having won the Award for best RI Fixed Income fund for three consecutive years. The reason this fund stands above the rest year after year becomes clear when considering its yield of 2% and overall S&P-equivalent credit rating of AA-.
In addition to high-quality fixed income exposure, investors can be confident in an added layer of security as a result of the strong best-in-sector ESG (environmental, social, governance) screening employed in security selection by Meritas. As noted in a recent study by Dr. Tessa Hebb for OceanRock Investments, the fund’s sponsor, the Sortino Ratios of Canadian RI Fixed Income and Balanced funds, including Meritas Income & Growth Portfolio, outperformed their benchmark 61% of the time. The Sortino Ratio is particularly relevant for measuring the risk/return performance of fixed income funds, where minimizing downside risk, and therefore loss of principal, is critical.
RI Balanced Category
The winner of the RI FundGrade A+ Award in the RI Balanced category is PH&N Community Values Balanced Fund
, for the second consecutive year. The fund is currently structured as a mix of the three PH&N RI funds in varying concentrations.
The fund of funds structure gives the manager the flexibility to change allocations among any of the three award-winning PH&N Community Values funds and tailor exposure to take advantage of prevailing market conditions. With an allocation tilted in favour of equities (60%) through the end of 2015, the fund emphasizes dividends and capital gains over the returns from bonds.
The fund has a three-year Information Ratio of 2, which is among the highest of any fund tracked by Fundata over a three-year period. The Information Ratio, which measures the contribution of active security selection over benchmark returns, is considered a measure of the consistency of manager performance, a useful metric where a high ratio validates the selection and performance of sub-managers through exposure to the underlying funds.
RI Equity Category
PH&N Community Values Global Equity Fund
is a first time RI FundGrade A+ Award winner but is no slouch when it comes to long-term performance. The fund boasts a 3-year Sharpe Ratio of 2.1, a reflection of its massive 23.3% compound return and 10.1% volatility for the same period, which indicates the fund is adept at maximizing efficiency in terms of returns earned for risk taken. Efficiency is also important in RI investment, where the focus extends beyond the tradeoff between risk and reward to dollar efficiency in terms of impact on the environment. Here, too, the fund excels, being ranked eighth in the Global Equity funds category of the Corporate Knights 2016 Eco-Fund Ratings, an assessment of relative environmental performance.
John Krisko is Analyst, Analytics & Data, at Fundata Canada Inc. a leading source for investment fund information, where he is involved with research and development of quantitative measures and models to analyze investment fund products, including the Fundata Prospectus Risk Indices and the RI FundGrade A+ Award.