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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Dec 31, 2024
Parnassus Fixed Income Fund returned -2.48% in Q4, outperforming the Bloomberg U.S. Aggregate Bond Index's -3.06% return, driven by strong security selection in mortgage-backed securities, particularly current coupon 30-year mortgages. For the full year 2024, the fund returned 1.92% versus the index's 1.25%, with corporate bonds being the primary driver of outperformance supported by overweight positioning and favorable security selection. The managers adjusted to a more defensive positioning, reducing corporate bond exposure and increasing Treasury allocation while shortening duration. They maintain an overweight to corporate bonds given yields above 5% but see mortgages as offering better asymmetric returns following corporates' strong performance. Key risks include policy uncertainty from the election results, potential inflation from trade restrictions, and the fading disinflation trend. The outlook anticipates continued corporate bond demand while expecting mortgage volatility to moderate as monetary policy uncertainty abates.
The fund pursues attractive current income through a core-plus bond portfolio with significant allocation to green/sustainable bonds, maintaining an overweight to corporate bonds while positioning defensively amid policy uncertainties and evolving inflation risks.
The managers expect continued demand for corporate bonds given yields remaining well above 5%, though they see mortgages as having a more compelling asymmetric return profile following corporate bonds' strong relative outperformance. They anticipate that interest rate volatility should recede as monetary policy uncertainty abates, supporting mortgage pricing.
Neutral / Balanced
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