October 12, 2004
Calvert Fills Gap in Small- and Mid-Cap SRI Value Categories With Two New Funds
by William Baue
The two new funds add diversification options to the socially responsible investment (SRI) palate.
Modern Portfolio Theory holds that broad diversification across asset classes and investment styles
helps insulate investors against risk. Socially responsible investment (SRI) practitioners have a
wealth of options in the large-cap asset class, but a more limited choice of small- and mid-cap SRI
funds. The options in these asset classes also tend more toward growth funds (which invest in
companies with projected earnings or revenue growth) than toward value funds (which invest in solid
but under-priced companies), further complicating diversification. To fill this relative gap and
enhance diversification options, the Calvert
Group launched the Calvert Small Cap Value Fund (ticker: CCVAX) and the Calvert Mid Cap Value
Fund (CMVAX) last
Calvert hedged its bets by assigning lead portfolio manager duties for both
funds to Eric McKissack, who managed one of the few SRI mid-cap value funds, the Ariel Appreciation
Fund (CAAPX), during his 16-year
tenure at Ariel Capital Management. The Ariel Appreciation and the Ariel Fund (ARGFX), a small-cap value
fund, are two of the most consistent financial performers in the SRI field, with 10-year annualized
returns of 14.62 percent and 15.30 percent respectively. Mr. McKissack, who now serves as chief
investment officer of Channing Capital Management, will be joined by Wendell Mackey, director of
investments for Channing, who will co-manage the funds.
"Our investment philosophy is to
employ an intrinsic-value methodology," said Mr. McKissack. "Through this strategy, we attempt to
identify companies that have a current market price that is at a significant discount--in the range
of 40 percent--to their fair market value."
Calvert bolsters its case for small-cap value
investing by comparing 10-year annualized returns (as of June 30, 2004) for the Russell 2000 Value Index (13.91
percent) to those of the Russell 2000 Growth Index (7.15
Calvert supports the case for small-cap investing by comparing historical Russell 2000 Index annual
returns to those of the S&P 500, which tracks large-cap stocks as of December
31, 2003. Over the past 10 years, the former has outperformed the latter, 15.3 percent to 11.0
percent; over the past 40 years, 15.2 percent to 10.3 percent. (Over the past 20 years, the two
indexes ran neck and neck, 13.5 percent to 13.4 percent.)
However, small- and mid-cap
investing tends to be research-intensive, as information on these smaller companies is harder to
obtain, a fact reflected in the relatively high expense ratios for the two new funds. The net
expenses for Calvert Small Cap Value Fund is 1.69 percent, 1.59 percent for the Calvert Mid Cap
In addition to supporting the financial research, the fees also help cover
Calvert's social research.
"Channing's rigorous review of a stock's financial performance
works in tandem with Calvert's thorough assessment of a company's corporate integrity across seven
broad areas of concern, including the environment and corporate governance," said Steve Falci,
Calvert's chief investment officer for equities. "Stocks must pass this double diligence
investment process before we invest."
The minimum investment to open an account in either
fund is $1,000.