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Sep 7 2017

Parnassus Income Funds: Parnassus Core Equity Fund #parnassus #equity #income #fund


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ActiveShare.info

Parnassus Income Funds

Parnassus Core Equity Fund

Active Fee Info

Enter passive fee: %

Active Fee is the annual expense ratio of the fund adjusted for the Active Share with respect to the self-declared benchmark and the expenses of investing in the self-declared benchmark index. Active Fee was introduced in a paper by Martijn Cremers and Quinn Curtis (“Do Mutual Fund Investors Get What They Pay For? The Legal Consequences of Closet Index Funds”. 2016, Virginia Law & Business Review 11(1), 31-93). As our default, we calculate the Active Fee assuming that the benchmark index is available at no cost, but users have the option to input the costs associated with investing in the benchmark index and adjust the Active Fee for such costs. The precise formula for the Active Fee is as follows: Active Fee = [ER – (1-AS)*PF]/AS, where AS = Active Share, ER = Expense Ratio, PF = Passive Fee. Under our default assumption that PF = 0, Active Fee = ER / AS, or the ratio of the expense ratio over the Active Share.

Definitions

Active Share is the percentage of fund holdings that is different from the benchmark holdings. As a result, the Active Share for a particular fund will differ depending on which benchmark is used.

Active Share is calculated as 100% minus the sum of the overlapping portfolio weights, where the overlapping portfolio weights only pertain to stocks that are in both the fund and the benchmark with a long position. For example, if a stock has a 3% weight in the fund and also a 2% weight in the benchmark, then the overlapping weight is 2% (i.e. the minimum of the two weights if both are greater than zero).

Active Share was introduced in the paper How Active is Your Fund Manager? (published in the Review of Financial Studies in 2009, co-authored by Martijn Cremers and Antti Petajisto). Please see also the recent paper Active Share and the Three Pillars of Active Management: Skill, Conviction and Opportunity (forthcoming in the Financial Analysts Journal. authored by Martijn Cremers) for more discussion and interpretation of how to use Active Share when analyzing investment funds.

“Minimum Active Share Across Benchmarks”

For each fund, we calculate the Active Share with respect to a large number of possible U.S. equity benchmarks, using either the official benchmark holdings or the holdings of ETFs that closely track these benchmarks. The Minimum Active Share Across Benchmarks is the lowest Active Share for the fund across all of these possible U.S. equity benchmarks. This benchmark thus has the largest overlap with the fund s holdings across all of the U.S. equity benchmarks considered.[1]

The Minimum Active Share Across Benchmarks can be compared to the Active Share with respect to the self-declared benchmark states in the fund s prospectus (see immediately below). If the Minimum Active Share Across Benchmarks is substantially lower than the Active Share for the self-declared benchmark, consistently over a longer period of time, this would suggest that the self-declared benchmark may not be the most appropriate benchmark for the fund.

Active Share for Self-Declared Benchmark

Active Share is the percentage of fund holdings that is different from the benchmark holdings. As a result, the Active Share for a particular fund will differ depending on which benchmark is used.

The Active Share for Self-Declared Benchmark compares the fund holdings to the holdings of the self-declared benchmark that is included in the fund s prospectus.

Only U.S. Equity Holdings Are Considered for the Active Share Calculations

For the Active Share calculations, we currently only consider the fund’s U.S. equity holdings. In other words, the Active Share only pertains to the part of the fund that is made up of U.S. equities, which is rescaled such that the fund’s weights in U.S. equity holdings sum up to one. Any fund holdings that are in cash or debt securities or non-U.S. equities are not considered for the Active Share calculation. Currently, the Active Share is only relevant for funds that are (almost) exclusively invested in U.S. equities (though some funds in our database may invest significantly in other securities). Therefore, we only include funds in our database that are mostly invested in U.S. equities, typically above 80% of their net assets.

The information presented shows the percentage of U.S. equities in the fund which are invested in stocks included in the Russell 1000, the Russell 2000, or outside of both ( Other , which means U.S. equities that are not included in the Russell 1000 or the Russell 2000). Note that Active Share calculations only consider the portion of the portfolio that is invested in U.S. equities.

The information on equity allocation can help to distinguish between funds that have a high Active Share because it contains stocks in the benchmark with very different weights than their benchmark weights, versus because it contains many stocks that are not included in the benchmark at all. An example for the latter case is a large cap fund benchmarked to the Russell 1000 that invests a large fraction of assets in stocks that are included in the Russell 2000. Such large cap fund may have a high Active Share but may potentially also have holdings that overlap with the Russell 2000, which is not incorporated its Active Share with respect to the self-declared benchmark (in this case, the Russell 1000).

For the U.S. equities in the portfolio, we calculate the weighted average length of time these equities have been in the portfolio over the last 5 years. This information is only displayed for funds for which sufficient holdings history is available. Details on the calculation of holdings duration can be found in the paper Patient Capital Outperformance by Martijn Cremers and Ankur Pareek, published in the Journal of Financial Economics 122, p. 288-306, 2016 .

Active Share by Style

The information in this section provides the Active Share of the fund with respect to both the Russell 1000 and the Russell 2000, in order to provide an easier comparison across funds that may have very different self-declared Active Shares or Minimum Active Shares Across Benchmarks .

This website is maintained and by Martijn Cremers, Professor of Finance at the Mendoza College of Business of the University of Notre Dame. Professor Cremers would like to acknowledge Touchstone Investments for its support throughout the development of this website. Touchstone Investments and Martijn Cremers are independent of each other. Professor Cremers serves as an external, independent consultant for Touchstone Investments. Data is updated about once a year.

The information provided is for informational purposes only, is given without charge and on a best-effort basis. Data errors may be present, and please notify us if you find any. Please refer and/or link to www.ActiveShare.info when using any of the information provided here in any materials. Read our Terms of Service for further information. The academic research on Active Share, including data, is available on https://activeshare.nd.edu (site is under construction).

[1] The set of benchmarks includes the following: (i) 13 Russell benchmarks (including small, mid and large cap benchmarks plus their value and growth components), (ii) 14 Standard and Poors benchmarks (including small, mid and large cap benchmarks plus their value and growth components), (iii) Calvert Social (KLD) benchmark, (iv) Dow Jones Select Dividend benchmark.

Data on self-declared benchmarks and expense ratios is from Morningstar Direct. 2017 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

ActiveShare.Info is maintained and by Martijn Cremers, Professor of Finance at the Mendoza College of Business of the University of Notre Dame. Professor Cremers would like to acknowledge Touchstone Investments for its support throughout the development of this website.


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