There has been a wave of fund companies rebranding their funds as “green” or ESG in order to generate inflows and to cash in on these investment trends. For them, it’s about the fees, not about any lofty goals. Shane Shifflett reports in The Wall Street Journal:
Fund companies are rebranding their out-of-fashion investment offerings as green, hoping to grab a portion of the cash pouring into sustainable products. In some cases, the rebranding has been in name only.
Last year, companies that manage mutual funds and exchange-traded funds rebranded a record 25 funds as sustainable, according to Morningstar. They say these funds have adopted investment strategies that utilize data on companies’ environmental, social and governance performance to pick stocks. Since 2013, fund companies have rebranded 64 funds, which had $35 billion in assets as of June.
The American Century Fundamental Equity Fund is now the Sustainable Equity Fund, the USAA World Growth Fund is the USAA Sustainable World Fund and the Putnam Multi-Cap Growth Fund is now the Putnam Sustainable Leaders Fund. Assets for all three are up since the rebrandings.
Many of these funds are actively managed and were experiencing chronic outflows prior to rebranding, said Morningstar Head of Sustainability Research Jon Hale. “You have big fund companies with an inventory of funds, a lot of which aren’t really attracting assets anymore, saying ‘OK, here’s this new investment trend happening; what do we do?’” Mr. Hale said.
The shift is akin to a car company freshening up a tired model. Actively managed funds, which are run by stock pickers, have been losing investor cash for years. Similar funds with a sustainable label have been raking in money, according to Morningstar.
Of the 64 rebranded funds, 35 were suffering from investor withdrawals in the three years before they went green, according to a Wall Street Journal analysis of Morningstar data. At 13 of the funds, investors began putting in cash again. At 45, new cash plus the rising stock market have boosted overall assets.
Action Line: If you need help building a portfolio that meets your own goals for retirement, avoid companies rebranding their stale funds. Instead, create a plan for success. If you need help, I would love to talk with you.
E.J. Smith - Your Survival Guy
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