Parnassus Enters ETF Market With Two Active Funds

Parnassus Investments, a 40-year veteran in sustainable investing, made its first foray into ETFs with the launch of two actively managed funds that each hold about 25 stocks, a more concentrated approach than the firm’s traditional 40-to-50 stock portfolios, according to CEO Benjamin Allen.

The Parnassus Core Select ETF (PRCS) and Parnassus Value Select ETF (PRVS) began trading on the New York Stock Exchange on Dec. 12, according to a company press release. The funds carry expense ratios of 0.58% and 0.59%, respectively.

“We've been looking over the last few years into the active ETF marketplace, and we're really seeing a lot of demand for active ETFs from our existing clients,” Allen told etf.com in an interview.

Rather than clone existing mutual fund strategies, the San Francisco-based firm designed the ETFs to offer more concentrated portfolios drawing from the firm’s most thoroughly researched ideas, Allen said.

The launches come as the global ETF industry hit a record $15.1 trillion in assets at the end of November, with year-to-date net inflows topping $1.6 trillion, according to recent ETFGI data. Active ETFs gathered $44.6 billion in November alone, pushing year-to-date active inflows to over $332 billion.

Active Management Focus

PRCS, the Core Select ETF, focuses on high-quality growth companies, with the top holdings including Microsoft, Amazon and Alphabet, according to the fund documents.

Meanwhile, PRVS, the Value Select ETF, targets undervalued companies poised for improvement, holding positions in Pfizer, S&P Global and Verizon. Portfolio manager and senior analyst Krishna Chintalapalli explained that PRVS specifically looks for companies where quality metrics are improving.

“A significant part of our client base views us as just really high quality investors,” Allen noted, adding that while sustainability remains central to the firm’s approach, many clients primarily focus on Parnassus’s investment capabilities.

The concentrated approach allows the funds to maintain longer holding periods, according to portfolio manager and senior analyst Andrew Choi.

“Given that our turnover tends to be between 20 to 30%, we look at a three to four year time period on all of the investments that we underwrite,” Choi said. This longer holding period enables the team to leverage their extensive research when making investment decisions.