A Top-Performing Multi-Asset ESG Income Fund

A Top-Performing Multi-Asset ESG Income Fund

Eventide Asset Management, LLC is a Boston-based Registered Investment Advisor and serves as the Advisor to Eventide Mutual Funds. Founded in 2008 with a vision to provide high performance values-based investments for individuals, financial advisors, and institutions, Eventide has become a leader in faith-based and socially responsible investing. Eventide is the Advisor to the Eventide Gilead Fund, the Eventide Healthcare & Life Sciences Fund, and the Eventide Multi-Asset Income Fund, and manages more than $1.6 billion in net assets.

Martin Wildy is portfolio manager of its newest fund, the Eventide Multi-Asset Income Fund. Martin has more than 10 years of experience as a portfolio manager and analyst, building sustainable portfolios, and researching companies in the tech, banking, real estate, and other sectors. His fund actively invests in income categories such as green bonds, “yieldcos”, REITs and MLPs.

I spoke with Martin on June 24.

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unnamed 12Hayden Capital's performance update for the second quarter ended June 30, 2022. Q2 2021 hedge fund letters, conferences and more Dear Partners and Friends, The markets continued to sell-off in the second quarter, especially for internet-based businesses.  This year continues to be the toughest stretch for us, since the Hayden’s inception.  Inflation concerns and the Read More

You have managed the Eventide Multi-Asset Income Fund since its inception on July 15, 2015. The mission of the fund is to seek current income while maintaining the potential for capital appreciation. Can you elaborate on that mission and what led you to create the fund?

The fund fits within the multi-asset income category. Other firms have launched a number of funds in this growing category.

The objective of these types of funds is threefold. First, to distribute an attractive level of income to shareholders, so investors who are looking to take distributions are able to generate income on a periodic basis. Second, to allow that income stream to grow over time. The final goal is to allow for long-term capital appreciation of the investment.

The objective in launching the fund was to meet those demands. Demographically, many people are transitioning from the accumulation to the distribution phase, and it makes sense for those who are taking distributions to have an investment strategy that is better aligned with their goals. Our goal is to generate income that helps match that liability stream. The challenge in today’s environment is that traditional savings vehicles – CDs, government bonds, money-market funds or the dividends on the S&P 500 – are quite low. We have the ability, through the multi-asset structure of the fund, to expand the opportunity set of income-producing securities to try and meet those three objectives.

One thing that is unique about this fund and how we differ from some of our peers is that we employ a value-based or socially responsible overlay to all of our investments. We focus on investing in companies that we view as leaders within their industries with regard to a number of external and internal stakeholders, such as its customers, employees, employee-supply chain, environment, community and society as a whole.

The fund has returned 6.64% this year, as of June 22. That compares to 2.24% for its Morningstar benchmark, the MSCI world-allocation Index, which placed it in the 8th percentile of its peer group. Eventide uses its own benchmark, which is a multi-asset income blend of 60% MSCI All Country World Index (net) and 40% Barcap Aggregate Bond Index. That index returned 2.95% as of June 22. The fund’s performance also compares favorably to 3.14% for the S&P 500. What decisions did you make that led to that outperformance?

As a small, growing fund, we have had the benefit of additional cash coming in on a regular basis. There was a lot of volatility in the income space in the second half of last year and early this year. We have been selective as we put new capital to work and tried to buy securities when they were on sale. Part of it is the benefit of being a young, growing fund and having inflows that we are able to put to work on an ongoing basis.

We have also benefited, as have other multi-asset income funds, from a relatively benign interest rate environment. Many investors were worried that income securities were going to be negatively affected by the rate-increase cycle that the Fed embarked on in December. Because of slowdowns in the economic data recently, as well as concerns surrounding the Brexit, it looks like that is on hold for quite some time. Through this year, we have seen many of the concerns regarding higher interest rates dissipate. This has been a benefit for all types of income-producing securities.

In addition, we have invested in areas that were under very heavy selling pressure earlier in the year. We were buying into these categories as they were selling off. We had some good stock selection, and it benefited the fund as markets and those names recovered.

You are coming up on the first anniversary of your fund. Is there anything else you want to add about how the market environment has helped or hurt you during this early phase?

The biggest challenge has been, in a very low interest rate environment, to achieve a level of yield that our shareholders would deem to be attractive. We want to balance adding securities that have higher yields with being aware of the risk of reaching too far for high yield. There is an old saying that more money has been lost reaching for yield than at the point of a gun. When investors start to push too far on the yield lever and stick their necks out, they can end up taking on some unintended risks. That can leave you open to a lot of volatility, and in a very low yield environment it is a risk that we have to manage on a daily basis.

There aren’t plentiful sources of yield. It is a relatively efficient market in the sense that if something offers a very high yield there is probably a reason for that. Investors need to be wary of that temptation.

As I mentioned, we have been aided by low interest rates and the realization of markets that the interest rate path that investors had been concerned about – in terms of future rate hikes – has not materialized. A lot of the fear that had been priced into income-producing securities has come off. That has benefited our fund as well as other income focused funds.


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