MarketWatch reports that fund founder Amy Domini said the fund has been constrained by the indexing formula. “For the last six years, it has been difficult to get stellar performance using the index strategy,” she said.
Domini noted that the way the index is weighted affects any funds based on it, as well as the way the fund measures up to benchmarks such as the Standard & Poor’s 500, according to the news report. “We have had a period of a number of years that have been quite frustrating, where our screening added value but the weightings we had to follow prevented us from delivering all of that value,” Domini said.
The management style Domini is seeking for the $1.2 billion fund is the same as for the Domini European Social Equity Fund opened last year. Domini screens will be combined with the quantitative management approach of Wellington, which uses computer analysis and modeling to select investments and move money.
SocialFunds.com reports that the Domini Social Equity Fund has generated annualized returns of 1.66% over the five-year period ending April 30, according to data provided by Thompson Financial Network, while the S&P 500 has returned 2.70% annually during the same period.
The fund’s expense ratio will climb to 1.15% from its current 0.95%, however, Domini expects returns to more than compensate for this increase, according to SocialFunds.com.
“We’re convinced that social and environmental screening adds value, but it has been frustrating to see this undermined by the market-cap-weighted structure of the portfolio,” Adam Kanzer of Domini told SocialFunds.com. “We think that the new strategy is going to enhance the strength of the use of social and environmental screens,” he added.