Parnassus Asia: "Socially" Aware

05/22/2014 10:00 am EST

Focus: FUNDS

Mark Salzinger

Editor and Publisher, The No-Load Fund Investor

We often recommend new funds run by promising and/or experienced managers; here, we profile a new Asia-focused fund that was just introduced in April, 2013, observes Mark Salzinger, editor of No-Load Fund Investor.

Parnassus Asia (PAFSX:US) is managed by Jerome Dodson, patriarch of the firm, and long-time lead manager of several other Parnassus products; Parnassus Investments has long provided funds that offer good investment performance in what it considers to be a socially responsible context.

They screen a broad universe of stocks down to a more manageable level by analyzing competitive advantages (e.g., low costs of production; high switching costs from its products and services; patents; and brand equity), and the quality of management.

Equally important, Parnassus invests in such companies only if the managers determine that they engage in positive environmental, social, and governance practices.

Regardless of how companies score on those three broad factors, Parnassus eliminates from investment consideration any company that derives significant revenue from alcohol, tobacco, gambling, weapons, the generation of electricity from nuclear power, and business involvement with Sudan.

Dodson spreads the assets of Parnassus Asia over various countries in the region, including China/Hong Kong (recently 27.4%), Taiwan (18.1%), Thailand (18.1%), Indonesia (13.4%), Japan (10.7%), and Singapore (8.2%).

Over the past 12 months, the fund has gained 11.1%, easily outpacing all of the other International Equity-Pacific funds we track.

Though Dodson attributes some of the strong performance to leaving a high percentage of the fund’s assets in cash for several months after its launch (thereby luckily avoiding a correction in Chinese stocks), the fund is now about 91% invested in equities.

Compared to benchmarks for Asia equity investing, the fund has above-average weightings in consumer discretionary and materials companies, and a smaller average market capitalization (though it does include some very large companies, too).

Net of reimbursement, the fund’s expense ratio is 1.25%. Investors who like to invest small portions of their assets in new, speculative funds certainly should consider this one.

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