About the manager

Parnassus Investments is an investment manager that seeks to invest in good businesses that have high returns on capital, above-average growth prospects, ethical business practices and sustainable competitive advantages. Founded in 1984 and independently owned, Parnassus Investments believes the most attractive opportunities for investments are when companies with good business fundamentals become temporarily undervalued due to market sentiment.

Parnassus Investments is one of the few firms in the responsible investment arena to do both its own environmental, social and governance (ESG) and financial research. Integrated into the fundamental research is an evaluation of companies' workplaces, environmental policies, product quality, corporate governance and community relations.

Investment philosophy

Parnassus Investments' investment philosophy is to buy undervalued companies that offer solid long-term growth prospects. The core of this discipline is a complete fundamental analysis of a company's products, financial statements and management. It believes the most reliable way to outperform the market is to combine a top-down macroeconomic outlook with bottom-up research to identify companies with good business fundamentals that the market has temporarily undervalued. It thinks independently of the market and is willing to go against prevailing sentiment. Parnassus analysts travel the country to meet with executives and industry contacts to accomplish this goal.

After a fundamental business review, Parnassus Investments produces extensive financial projections to determine how much a company is worth. Along with the numbers, the company spends a lot of time analyzing risk and current business trends. To be included in the portfolio, a stock must have twice the upside potential versus downside risk. In addition, it looks for companies that are going to be more competitive in five years than they are today. Parnassus Investments looks for companies that have built-in advantages against competition, such as a strong brand or superior products, as well as an effective team managing the company. Parnassus Investments typically will hold stocks as long as they are undervalued and the business fundamentals are intact. If a company is not meeting its performance expectations, it does an extensive review to determine if the business fundamentals have changed. The team constantly monitors investment positions with the goal of providing upside participation with downside protection.

Investment approach

Parnassus Investments is responsible for two fund-specific approaches - Equity Income and Small Cap.

The Parnassus Equity Income Strategy seeks to achieve both current income and capital appreciation by investing primarily in a diversified portfolio of equity securities. Equity securities include common and preferred stock as well as convertible bonds. The Strategy will normally invest in a way that emphasizes equity securities that pay interest or dividends. It also may invest in non-dividend-paying equity securities, fixed-income securities and money-market instruments. Using a value-oriented investment process, Parnassus Investments seeks to invest in equity securities that pay dividends above the yield of the S&P 500 Index, have the potential for capital appreciation and which Parnassus Investments believes have the capacity to raise dividends in the future.

The Parnassus Small Cap Strategy seeks to invest primarily in the stock of companies with market capitalizations under $3 billion. These companies must, in the opinion of Parnassus, be undervalued, but they must also have good prospects for long-term growth and an identifiable catalyst that could move the stock higher in the succeeding 12 months.

Portfolio managers

Todd C. Ahlsten, Chief Investment Officer and Portfolio Manager, Parnassus Equity Income Fund

Todd began his career at Parnassus Investments in 1994 as a research analyst. He was subsequently promoted to Director of Research in 1998 and in 2001 became Portfolio Manager for the Parnassus Equity Income Fund. He became Chief Investment Officer in 2008. Todd received his bachelor's degree in business administration from the University of California, Berkeley Haas School of Business in 1994 with an emphasis in finance and accounting.

Jerome L. Dodson, Chairman, President and Portfolio Manager, Parnassus Small Cap Fund

Jerome founded Parnassus Investments in 1984. He is the Chairman and Chief Executive Officer and is Portfolio Manager of the Parnassus Fund, Parnassus Small-Cap Fund, and Parnassus Workplace Fund. Prior to founding Parnassus Investments, he served as President and Chief Executive Officer of Continental Savings of America from 1976 to 1982, where he started the Solar T-Bill program to finance solar energy installations and also developed innovative programs to finance low- and moderate-income housing. Jerome received his bachelor's degree in political science from the University of California, Berkeley and received his master's degree in business administration from the Harvard University Graduate School of Business.

ESG commitment

Parnassus Investments conducts fundamental research to determine a company's financial health and its business prospects, as well as the company's business ethics. A management team with good business ethics is one of the most fundamental criteria in evaluating a company; Parnassus Investments thinks it is crucial to the long-term success of a business. It also avoids tobacco, alcohol, gambling, weapons and nuclear power companies.

Parnassus Investments' underlying principle when evaluating a company's corporate responsibility program is ethical business practices. This is ingrained in all aspects of a business, including how it treats its employees and customers, its environmental programs and its relationship with its community. Parnassus Investments looks for companies that are thoughtful about their impact on the environment. It recognizes that sustainable activities can increase the long-term value of a business; examples of this include attracting talented employees and minimizing risks to reputation. When Parnassus makes an investment in a company, the company represents its investors' interests to the company's management. Parnassus is most effective working with its portfolio companies as a partner, and uses this as a primary tool for engagement. Parnassus Investments also coordinates with public interest groups and other institutional investors to represent its investors' interests.

Pax World Management makes no assurance that the manner in which Parnassus Investments manages its assets in the ESG Managers™ Portfolios is the same as or entirely consistent with the manner in which it manages any of its other Funds or accounts.

Click here to access the Parnassus Investments web site

Parnassus Investments is not affiliated with ALPS Distributors, Inc. 

Funds that emphasize investments in smaller companies may experience greater price volatility.

When investing in bonds, you are subject, but not limited to, the same interest rate, inflation and credit risks associated with the underlying bonds owned by the Fund.